SMPC votes Seven / Two to Raise Bank Rate in June
15 June 2018
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Shadow Monetary Policy Committee vote on rate raise in June
In its June 2018 e-mail poll, the Shadow Monetary Policy Committee (SMPC) elected, by a vote of Seven to Two, to raise rates in June. One member voted for an immediate rise of 0.5%. Six favoured a 0.25% rise. Two favoured holding rates.
Advocates of raising rates acknowledged that monetary growth has recently been weak and overall economic performance has fallen back, but noted that the labour market remains strong and that the underlying case for some normalisation of rates away from emergency levels is not particularly affected by one or two quarters of weaker growth.
Advocates of holding rates noted that inflation has fallen back and seems unlikely to exceed the target on any sustained basis and in an environment of weak growth and poor productivity performance felt that a rate rise was hard to justify.
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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Advocates of raising rates acknowledged that monetary growth has recently been weak and overall economic performance has fallen back, but noted that the labour market remains strong and that the underlying case for some normalisation of rates away from emergency levels is not particularly affected by one or two quarters of weaker growth.
Advocates of holding rates noted that inflation has fallen back and seems unlikely to exceed the target on any sustained basis and in an environment of weak growth and poor productivity performance felt that a rate rise was hard to justify.
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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