New members for UK rate committee

The Monetary Policy Committee is responsible for setting interest rates

Two new members have been appointed to the Bank of England's interest rate-setting committee.

British Airways chief economist Andrew Sentance and Professor Tim Besley of the London School of Economics are to join the Monetary Policy Committee.

The MPC has been two members short since the death of David Walton and Richard Lambert's move to the CBI.

Professor Besley will join the MPC in September, while Mr Sentance will join the committee in October.

The MPC is responsible for setting UK interest rates and through its rate decisions is charged with meeting the government's inflation target - currently set at 2%.

At its latest meeting, the MPC kept UK rates on hold at 4.5% for the 11th month in a row.

Selection questions

"I am delighted that Tim Besley and Andrew Sentance have agreed to join the Monetary Policy Committee," said Chancellor Gordon Brown.

"Their extensive experience will enable them to make an invaluable contribution to the work of the committee."

The new members are well regarded, credible additions to the MPC Kit Juckes, Royal Bank of Scotland

The MPC has been understaffed since Mr Lambert left the committee in March, and the Treasury has come under fire for the delay in appointing new members.

The selection process has also come under question, with critics arguing that the process needs to be more transparent.

Speaking in the House of Commons, Gordon Brown said the appointments had been made "strictly in accordance" with the rules governing the MPC.

But Conservative MP Sir Peter Tapsell questioned why the process could not be made more open.

"Is it appropriate in a Bank of England you claim to have made independent that these appointments should be made by you in such a personal way," he said.

'Credible additions'

In the City, the announcement led to the pound falling slightly against the US dollar and the euro as analysts viewed Mr Sentance as being less likely to raise rates than others.

However, the reaction from analysts to the appointments was generally positive.

"It's a very good thing to get back up to the full complement of committee members," said Kit Juckes at the Royal Bank of Scotland.

"The new members are well regarded, credible additions to the MPC and the market will view them as maintaining its quality."

Amit Kara at UBS said: "I think these are both excellent appointments.

"Tim Besley is possibly the leading UK academic economist... Andrew Sentance's experience on the industry side will be very useful."

The move continues the tradition of appointing MPC members from the London School of Economics.

Bank Governor Mervyn King and chief economist Charles Bean, as well as former MPC member Charles Goodhart, were economics professors at LSE.