Economist Gertjan Vlieghe to Join BOE Rate-Setting Committee

        By Jason Douglas and Paul Hannon
        The U.K. government Tuesday named Gertjan Vlieghe, an economist at Brevan Howard Asset Management, to sit on the Bank of England's Monetary Policy Committee.
        From Sept. 1, Mr. Vlieghe will serve a three-year term as one of four members of the nine-person committee who aren't full-time officers of the BOE, and are known as "externals." The MPC sets U.K. interest rates.
        The appointment fills a vacancy on the body created by the upcoming departure of David Miles, an economist who is near the end of his second, three-year term. Like Mr. Vlieghe, he had worked in financial services prior to joining the MPC.
        Mr. Vlieghe spent seven years at the BOE before embarking on his career as a banker, serving for some of that time as economic assistant to Mervyn King, Mark Carney's predecessor as governor.
        "Dr Vlieghe is an economist of outstanding ability who brings experience from his time at both the Bank of England and the financial services industry to the role and will be a strong addition to the MPC," said Chancellor of the Exchequer George Osborne.
        The new arrival is likely to have a busier time than his predecessor.
        The MPC last changed its key interest rate in March 2009, and last altered its program of bond purchases in 2012. But MPC members have recently begun to discuss the appropriate timing for raising the key rate, a move likely brought closer by the U.K. economy's surprisingly strong performance in the second quarter of this year.
        Mr. Vlieghe wrote about monetary policy as a doctoral student and academic, focusing on how interest-rate decisions filter through the banking system to the rest of the economy. Another paper, published by the Federal Reserve Bank of New York, examined the links between house prices, consumption and interest rates.
        Fabrice Montagne, chief U.K. economist at Barclays, said in a note to clients that he expects Mr. Vlieghe's views on policy will probably chime well with those of Mr. Carney and other top officials, who have expressed a cautious stance on the timing and pace of future rate increases. Investors expect the first increase to come early next year and for the BOE to inch rates slowly higher over the next few years.
        New MPC appointees must be quizzed by lawmakers on parliament's Treasury Committee, which scrutinizes economic policy. The panel can't block appointments but can--and occasionally does--express its doubts about a candidate's suitability.
        Mr. Vlieghe's past career at the BOE may invite questions about his independence, a key attribute for an external member of the MPC. And his hedge fund career may raise eyebrows among left-leaning lawmakers suspicious of high finance.
        George Kerevan, a Scottish National Party lawmaker who sits on the Treasury Committee, said it would be inappropriate to judge Mr. Vlieghe's appointment until he and his fellow lawmakers have interviewed him, but added that he'd like that to happen as soon as possible.
        "The committee's two criteria for appointment to the MPC are professional competence and personal independence," he said in an email. "I would expect Dr Vlieghe to be questioned on both his current professional activities as well as his previous academic and Bank of England responsibilities."
        The U.K. Office for National Statistics said Tuesday gross domestic product expanded 0.7% between April and June, an annualized rate of 2.8%. The figures are just a preliminary estimate, but they spell out that the economy has recovered from a slight slowdown in the first quarter--when quarterly growth was 0.4%--and is ready to gather pace during the remainder of the year.
        (END) Dow Jones Newswires

        July 28, 2015 09:40 ET (13:40 GMT)

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