SMPC votes five / four to raise Bank Rate in November
31 October 2016
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SMPC minutes November 2016
At its October 2016 face-to-face meeting, the Shadow Monetary Policy Committee (SMPC) elected, by a vote of five to four, to raise rates in November. Of the five members favouring a raise, three preferred a rise of 0.25% and two a rise of 0.5%.Of the four members voting to hold, three had a bias to raise rates soon.
All those members expressing an opinion felt that the August rate cut by the Bank of England had been a mistake. However, a number of those feeling this way felt constrained, by that error, from voting to raise rates at this stage because of the credibility damage that might cause to the Bank. Others felt that the fundamentals should dominate the decision. Monetary growth is very strong, GDP growth is solid, inflation is forecast to go far above target, and the pound is weak, providing a very considerable monetary boost and driving inflation above target over the planning horizon. These factors, they felt, were sufficient to justify a rise which past errors should not prevent. No member felt there was any evidence Brexit has had a negative impact of a scale that necessitates or justifies ongoing monetary loosening.
The SMPC is a group of economists who have gathered quarterly at the IEA since July 1997, with a briefer e-mail poll being released in the intermediate months when the minutes of the quarterly gathering are not available. That it was the first such group in Britain, and that it gathers regularly to debate the issues involved, distinguishes the SMPC from the similar exercises carried out elsewhere. To ensure that nine votes are cast each month, it carries a pool of ‘spare’ members. This can lead to changes in the aggregate vote, depending on who contributed to a particular poll. As a result, the nine independent and named analyses should be regarded as more significant than the exact overall vote. The next two SMPC polls will be released on Sunday of 10th December 2016.
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All those members expressing an opinion felt that the August rate cut by the Bank of England had been a mistake. However, a number of those feeling this way felt constrained, by that error, from voting to raise rates at this stage because of the credibility damage that might cause to the Bank. Others felt that the fundamentals should dominate the decision. Monetary growth is very strong, GDP growth is solid, inflation is forecast to go far above target, and the pound is weak, providing a very considerable monetary boost and driving inflation above target over the planning horizon. These factors, they felt, were sufficient to justify a rise which past errors should not prevent. No member felt there was any evidence Brexit has had a negative impact of a scale that necessitates or justifies ongoing monetary loosening.
The SMPC is a group of economists who have gathered quarterly at the IEA since July 1997, with a briefer e-mail poll being released in the intermediate months when the minutes of the quarterly gathering are not available. That it was the first such group in Britain, and that it gathers regularly to debate the issues involved, distinguishes the SMPC from the similar exercises carried out elsewhere. To ensure that nine votes are cast each month, it carries a pool of ‘spare’ members. This can lead to changes in the aggregate vote, depending on who contributed to a particular poll. As a result, the nine independent and named analyses should be regarded as more significant than the exact overall vote. The next two SMPC polls will be released on Sunday of 10th December 2016.
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