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By David Milliken and William Schomberg
LONDON, May 15 (Reuters) - British finance minister George Osborne has again picked an overseas candidate for a top job at the Bank of England, naming former White House adviser Kristin Forbes as an interest rate-setter at the central bank.
Forbes was the youngest-ever person appointed to the White House's Council of Economic Advisors (CEA), where she served President George W. Bush from 2003 to 2005.
"Dr Kristin Forbes is an economist of outstanding ability with real practical experience of policy making," Osborne said as he announced the appointment on Thursday.
Forbes is currently an economics professor at the Massachusetts Institute of Technology.
Osborne has previously looked abroad for BoE appointments, poaching Governor Mark Carney from the Bank of Canada and hiring International Monetary Fund official Nemat Shafik as a deputy governor.
He also looked beyond the British-based pool of candidates when he appointed Britain's European Union ambassador, Jon Cunliffe, as a deputy governor.
Forbes will start on July 1 and serve a three-year term. With Shafik, the appointment means the MPC will have two women on it for the first time in around a decade.
She fills the last open seat on the nine-member Monetary Policy Committee which was up for grabs after one of its external members, Ben Broadbent, was named as a new deputy governor of the Bank.
A former colleague at the White House said Forbes worked on U.S. policy issues at a time when the country's economy was struggling to shake off the effects of a recession in the early 2000s, something that has echoes in Britain today.
"She was there when we had a recovery but for many Americans it didn't feel like it," said Philip Swagel, a former CEA chief of staff. "My sense is that that is the British experience. The data says things are getting better but many people are still waiting for it."
Forbes will join the Bank of England as it comes under pressure to signal more clearly that it will start to raise interest rates from a record low where they have sat for more than five years. A pickup in the economy can run further before inflation risks mount, the BoE has said.
While advising Bush, Forbes worked on a statement by the Bush administration that stressed the openness of the U.S, economy to foreign investment at a time when public opinion was hostile to outsourcing of jobs abroad, Swagel said.
"She has policy experience so she understands the pressures of actually making policy. But she also has a superb academic background," he said.
Forbes's research has focused on the risks of a financial crisis in one country spilling over into others, macroprudential regulation and capital flows.
Jeffrey Frankel, a professor at Harvard who has collaborated with Forbes on several projects, praised her as a good macro-economist who will approach the BoE job with an open mind.
"She is a very sensible, pragmatic macro-economist and if the question is would she be more hawkish or dovish, I just don't know. It depends on what the circumstances are," he said.
Frankel urged against drawing conclusions about her economic views on monetary policy from the fact that she served in a Republican administration.
"The Republican party in the United States in recent years has been dominated by some people with some pretty strange views, and I don't think that should reflect on her. She is not at all like that."
As well as the White House and academia, Forbes has also worked for the World Bank, Morgan Stanley and the U.S. Treasury.
Britain's finance ministry said 34 people, including 10 women, applied for the MPC role, which was advertised in April.
Carney said in a statement that he welcomed Forbes's appointment. (Additional reporting by William James and Ana Nicolaci da Costa; editing by William Schomberg/Jeremy Gaunt)