Monetary Policy

SMPC votes five/four to hold Bank Rate in February


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The SMPC votes to hold bank rates in February

In a significant reversal of its longstanding recommendation to raise rates, the Institute of Economic Affairs’ Shadow MPC has voted to keep rates on hold.  This was driven by three members who have changed their position. Those favouring a hold included members who have been long-standing opponents of raising rates.

It was argued by those wanting a hold that there is no inflationary pressure and that the recovery is not sufficiently secure for the economy to tolerate rate rises. It was also argued that raising rates at a time when inflation is far below target was incompatible with the inflation targeting regime and that political and geopolitical uncertainties are sufficiently high to warrant a temporary delay in rate rises.

Those advocating raising rates emphasised that the strategy of maintaining near-zero rates has been damaging to real economic growth, to productivity growth, to the pressure to achieve a sustainable fiscal position and to longer-term financial stability. There was an excuse for setting rates near zero in 2008/09, but subsequently they have been kept at that level for far too long: the taboo of rate rises should be broken and normalisation is long overdue.

Notes to editors:

To arrange an interview about the report please contact Camilla Goodwin, Communications Officer: [email protected] or 07821 971 443.

The complete minutes from the meeting can be downloaded here.

What is the SMPC?

The Shadow Monetary Policy Committee (SMPC) is a group of independent economists drawn from academia, the City and elsewhere, which meets physically once a quarter at the Institute for Economic Affairs (IEA) in Westminster, to discuss the state of the international and British economies, monitor the Bank of England’s interest rate decisions, and to make rate recommendations of its own. The inaugural meeting of the SMPC was held in July 1997, and the Committee has met regularly since then. More details on the SMPC can be found here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.



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