At its April 2017 face-to-face meeting, the Shadow Monetary Policy Committee (SMPC) voted by seven to two, to raise Bank rate in May. This is the biggest vote for a rise since rates were cut to their historic lows. Of the seven members favouring a raise, four preferred a rise of 1/4% and three a rise of ½%. Of the two members voting to hold, one had a bias to raise once the election on 8th June was out of the way.

 

All those members calling for a rate increase felt that the cut of ¼% made in August last year needed to be reversed. Even if economic conditions did not improve much from current levels, a rise was justified to give room for further cuts in future should they be required. Some felt that it was to ward off an increase in inflation expectations amongst households, and others that it was to bolster the credibility of the Bank of England as price inflation rose above the 2% target. It was notable that no one thought the UK economy would slow sharply this year, even with Brexit negotiations and a surprise general election being called by Prime Minister Theresa May. That said, it was also clear that no one thought the economy would grow by much above a 2% annual pace this year, or that price inflation was a serious concern.

 

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.

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