Considerable Concern for the Supply Side of the Economy Expressed by Members
There was considerable uncertainty surrounding the prospects for the world economy. Whilst growth in the Euro zone is unexciting, the world economy is expected to grow at a rate between 2 and 2.5%. However, the effects of the SARS virus and any impact of the aftermath of the war with Iraq is difficult to determine at the current time. Monetary growth is not weak and inflation is currently above target although it is expected to move back towards target.
The Committee believed that the Bank of England may well cut rates over the next quarter but that it would be wrong to do so unless there is a severe economic shock created by events such as SARS. If the Bank did cut interest rates, without such events, they would be responding to low growth caused by poor supplyâ€“side conditions rather than to the potential for aboveâ€“target inflation.
The minutes of the meeting are available here.
The Shadow Monetary Policy Committee, which has shadowed the MPC since its creation, has no relationship with the recently formed Times Shadow Monetary Policy Committee