* UK appoints Goldman Sachs economist as rate-setter
* Broadbent succeeds hawk Sentance from June 1
* Broadbent predicted May rate hike, 2.25 pct by end of 2012
(Adds further economist reaction, Broadbent quotes)
By David Milliken
LONDON, March 7 (Reuters) - Britain's government has picked a Goldman Sachs economist who favours tighter monetary policy to replace arch-hawk Andrew Sentance at the Bank of England, likely preserving the existing balance on the BoE's policymaking board.
Finance minister George Osborne named the U.S. investment bank's UK economist Ben Broadbent on Monday to succeed Sentance when he steps down from the BoE's Monetary Policy Committee at the end of May.
The MPC is currently split 6-3 against raising rates, but markets believe it is odds-on to raise rates in May from a record low of 0.5 percent.
Broadbent, a former BoE and Treasury economist who has worked at Goldman Sachs since 2000, will serve a renewable three-year term.
His research at Goldman suggests he is upbeat about UK growth for 2011, and in a research note published on Sunday he said that recent private-sector activity surveys put the BoE "on the cusp of rate-hike territory".
Goldman Sachs has pencilled in three quarter-point rate rises for this year and a further four for 2012, making their forecasts slightly higher than the consensus in a Reuters poll.
While economists' forecasts of the most likely path for central bank rates do not always match their personal views of appropriate policy, they appear to overlap in Broadbent's case.
"In short, it looks as if rates should rise sooner than (BoE Governor) Mr King would like," he wrote in an opinion piece for the Financial Times on Feb. 9.
Economists familiar with Broadbent's work said that he was at the more hawkish end of the policy spectrum.
"While he's probably nowhere near as hawkish as Sentance, he'll be on that end of the MPC," said Nomura economist Philip Rush.
Sentance voted for a 50 basis point increase in interest rates last month, and was a lone voice calling for higher rates throughout the second half of 2010.
Rush said Broadbent had appeared surprised at the slow pace of BoE rate tightening in the past, and expected him to vote for an August rate rise, assuming the bank had already started to tighten policy in May.
Goldman Sachs's UK economists, led by Broadbent, were at the extreme hawkish edge of the range of regular forecasters in Reuters' Bank of England interest rate polls for much of 2010.
In January 2010, Goldman predicted rates would rise to 1.5 percent by the end of the second quarter of last year, and 2.5 percent going into 2011 -- hugely out of step with the consensus and, as it turned out, reality.
Broadbent has described the large 0.6 percent contraction in the British economy at the end of 2010 as a "weather-related blip", arguing that official data overstates the depth of the downturn. He has played down the likely impact of fiscal tightening on UK growth, given the export opportunities offered by a strong global economy.
More recently, Broadbent has said that whether the BoE will raise rates depends on first-quarter growth living up to the expectations of a sharp rebound and private-sector wage deals picking up further.
A rate increase purely to bolster the BoE's credibility would be premature, as bond markets are relatively stable, and policymakers should not overstate their ability to tackle real shocks facing the British economy, he added.
Equally, the impact of higher interest rates on indebted households would be relatively modest compared to the effect of tax rises and energy costs, and this should not be an argument against tightening rates, he said.
Simon Hayes, an economist at Barclays Capital, said that it was notoriously difficult to predict how an economist would behave once he was on the MPC. Sentance was expected to be a policy dove -- supporting relatively lower interest rates -- given his background as a business economist.
"However, from what we know of Mr Broadbent, although he may not be as hawkish as Mr Sentance he seems likely to be towards that end of the MPC spectrum," he said.
Broadbent studied at the University of Cambridge and Harvard University, where he gained a PhD, and also worked as an assistant professor at Columbia University.
"His broad professional experience in the financial sector and academia, as well as his detailed knowledge of the UK economy, will be extremely valuable to the Committee," Osborne said in a statement.
Britain's finance ministry said that 26 men and one woman applied to replace Sentance after the position was advertised in January. Applicants were interviewed by two senior Treasury officials and former MPC member Kate Barker. (Additional reporting by Christina Fincher, Matt Falloon, Fiona Shaikh and Andy Bruce; editing by Patrick Graham)