SMPC Votes Eight/One to Hold Bank Rate in November


Government and Institutions

IEA Current Controversies 71

Economic Affairs
At its final meeting of 2019, the Shadow Monetary Policy Committee (SMPC) voted by eight votes to one to keep Bank rate at 0.75%.

Although the vote was held before Parliament decided to hold a General Election on 12 December 2019, none of the Committee members has changed their view. The adverse effects of uncertainty about a deal or not on leaving the EU remains the key issue driving the majority view on short term interest rates. All agreed that the economy had slowed over the last few months with uncertainty about Brexit cited as the critical reason.

Concerns do exist about the external environment, of trade wars, and slowing economic growth in the Eurozone. Still, the principal reason for the UK’s weaker economy was felt by most to be Brexit uncertainty. There was general agreement that an end to that uncertainty might lead to a bounce in
the pace of growth. At that point, some would vote for rate rises and QE to  start to be reversed.

For the one dissenting vote to raise rates, the main factor was a view that monetary policy was already too loose and, even in the event of a further slowdown – whether due to a no-deal Brexit or not – further easing was not required. Indeed, rates should be raised immediately, and QE should start to be reversed to begin to undo some of the adverse effects on financial markets and investors.

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