Bank loses interest rates 'dove

The Bank of England is to lose its leading champion of lower interest rates as Sushil Wadhwani steps down from the monetary policy committee (MPC), it was announced today.

Mr Wadhwani is to be replaced on the Bank's interest rate-setting MPC by Marian Bell, a former senior economist at Royal Bank of Scotland (RBS). The Treasury's appointment of Ms Bell ends months of speculation as to whether Mr Wadhwani - a former hedge fund manager - would stay on or be replaced when his three-year term ends next month.

In a letter to the chancellor, Gordon Brown, Mr Wadhwani said he had decided not to seek reappointment, although the Treasury is thought to have wanted him to stay.

"I am delighted that Marian Bell has agreed to join the monetary policy committee," Mr Brown said. "Her extensive experience as a financial economist will enable her to make an invaluable contribution to the work of the committee. I would like to thank Sushil Wadhwani for his outstanding contribution to the MPC's work over the past three years, and wish him well for the future."

Ms Bell currently runs a consultancy called Alpha Economics after leaving RBS when it took over NatWest bank in 2000. She also worked as an economic adviser to the Treasury between 1989 and 1991. City economists do not expect her to match Mr Wadhwani's dovish approach to interest rates.

Ms Bell will be the second woman to become a member of the highly influential MPC. The other is former Confederation of British Industry chief economist Kate Barker. Ms Bell joins the MPC in June and will attend her first rate meeting in July due to prior commitments.

That means the June meeting will have eight members instead of the normal nine, with the Bank of England governor, Sir Edward George, holding the casting vote. Rates have stayed at 4% for the past five months, a 38-year low and recent comments from the Bank indicate that it is in no hurry to raise rates despite strong consumer spending.

Mervyn King, one of the Bank's hardliners on inflation, yesterday said that he expected consumers to rein in their spending in the face of higher taxes and weaker earnings growth. The City took his comments to mean that the Bank will leave rates on hold at its next MPC meeting on May 9.