- Chancellor of the Exchequer Osborne announces move on Friday
- Saunders has predicted the U.K. expansion will slow this year
Michael Saunders, an economist at Citigroup Inc., will join the Bank of England’s Monetary Policy Committee, replacing academic Martin Weale.
Chancellor of the Exchequer George Osborne announced the appointment on Friday, saying Saunders, 52, has a “wealth of experience.” The Treasury said in a statement that the appointment was for three years starting on August 9. There were 23 applications for the role, of which four came from women.
“He’s very well known to many of you and his time has come,” Osborne told reporters in Washington, where he’s attending the Spring meetings of the International Monetary Fund and World Bank.
In his current role, Saunders has published research on Britain’s referendum on its European Union membership, writing in March that the poll may spur persistent political and economic uncertainties that may not end even if the country votes to stay. That could prompt criticism of the appointment by campaigners for a so-called Brexit should he continue to highlight the potential damage to the economy from the vote.
Earlier this month, Saunders predicted that the U.K. economic expansion will slow to 0.2 percent this quarter or possibly be even weaker. That matches the lowest estimate in a Bloomberg survey of economists and is below the median forecast of 0.5 percent. He said businesses are likely to become increasingly cautious as the referendum approaches, especially if polls remain close, hitting hiring and investment.
“The MPC are unlikely to regard near-term weakness in the economy as a reason to loosen policy, but will wait to see how things look after the EU referendum,” Saunders wrote in a note this month. “We continue to believe that the next rate move is probably -- eventually -- up rather than down, in both a Brexit scenario and our base case of continued EU membership.”
One of the more activist members of the nine-member MPC, Weale -- who will stay in his role until after the August monetary policy decision -- voted in the minority to raise the benchmark from a record low for five consecutive months between August and December 2014.
“The immediate impact of it is a dovish change in the mix of the committee, but it doesn’t necessarily always mean that it moves in that direction,” said Phil Rush, an economist at Nomura International Plc in London. “Saunders tends to be quite outspoken, but he can flip very, very fast. At the moment he’s dovish, but he can change quite quickly.”
Saunders -- Citigroup’s U.K. economist and head of West European economic research -- will be one of four so-called external members of the MPC who serve in a part-time capacity. His appointment means Osborne is replacing an economist with a deep knowledge of the labor market with a bank economist.
He joined Citigroup in October 1990 and previously spent two years with Greenwell Montagu as an economist covering U.K. economic trends and their implications for the gilt market. Saunders also worked at the Institute for Fiscal Studies after graduating from the London School of Economics in 1986 where he studied econometrics.