SMPC votes eight / one to raise bank rate in August
In a lively and well-attended discussion, the case for a rate rise was made by the majority on three grounds: first, a need to reverse what was seen as a unnecessary cut last year; second, the monetary statistics supported a faster growing economy than current data suggested and so liquidity was plentiful; third, it was high time that the emergency level interest rate still prevailing started a journey to some form of normality. Those wanting an immediate rate rise were split three in favour of ½% and five in favour of ¼%. The one dissenter to hold rates had a bias to tighten but argued that ‘political uncertainty’ meant that this was not the right time.
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 regularly gathers 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.