The Bank of England’s monetary policy committee will announce its latest policy decision on interest rates at midday on Thursday.
Back in August, the MPC slashed its forecasts for growth and announced a package of measures to support the post-referendum economy. Interest rates were slashed to an all-time low of 0.25%; the Bank announced it would buy a further £60bn of government bonds, expanding its quantitative easing (QE) programme to a total of £435bn; and plans to buy £10bn of corporate bonds were revealed.
Much has happened since August for the MPC to take into account. Theresa May announced she would trigger article 50 by the end of March, prompting a further sharp fall in the value of the pound. Official figures showed economic growth was stronger than the Bank expected in the months after the Brexit vote in June, with a 0.5% increase in GDP in the third quarter. Meanwhile, there are increasing signs that inflationary pressures are building as the impact of the weaker pound feeds through to higher import prices.
As the next meeting nears, here is a reminder of what some members of the nine-member MPC have had to say since they last voted.
Mark Carney, governor
The governor has given little away on the likely path of interest rates. Much of the focus in recent weeks has been on his future at the Bank.
Speaking on the subject of green finance in Berlin on 22 September, he made only a broad reference to the low interest rate environment.
The Bank of England has long stressed that central bank policies are not the cause of low rates, but responses to them. We are actors in a play written by others.
Long-run prosperity was never in the gift of monetary policymakers. As the 10th anniversary of the start of the crisis approaches, a consensus is growing that escaping this low-growth low-inflation trap will require a rebalancing between monetary, fiscal and structural policies.
However, he told the House of Lords economic affairs committee on 25 October that the MPC would be taking into account the weak pound when it meets this week:
We do not have a target for the exchange rate. We believe in flexible exchange rates. However, it is a factor that influences the stance of monetary policy … it is undoubtedly something that we will take into account over the next week, as we sit down, update our forecast and make our policy decision.
Kristin Forbes, external member of the MPC
Kristin Forbes suggested the Bank’s decision to cut interest rates to 0.25% should be enough to prop up the UK economy following the referendum. Forbes voted for the rate cut at the MPC’s August meeting but opposed the decision to expand QE and buy corporate bonds.
Speaking at London’s Imperial College on 22 September, she said:
The economy is experiencing some chop, but no tsunami. The adverse winds could quickly pick up – and merit a stronger policy response. But recently they have shifted to a more favourable direction.
Looking forward, I am not yet convinced that additional monetary easing will be necessary to support the economy … The fishermen in the boat need to stay vigilant, and may already be a bit seasick from the chop they have already encountered, but if the current weather continues, they should be able to sail home without more aid.
Dame Nemat Shafik, deputy governor for markets and banking
Dame Nemat Shafik appeared to take a different view to Forbes when she said the Bank would probably have to take more action if the UK was to avoid a damaging slowdown following the Brexit vote. Giving a speech at a Bloomberg event in London on 28 September, she said:
There is no doubt in my mind that the UK is experiencing a sizeable economic shock in the wake of the referendum. It seems likely to me that further monetary stimulus will be required at some point in order to help ensure that a slowdown in economic activity doesn’t turn into something more pernicious.
Michael Saunders, external member of the MPC
The MPC’s most recent appointee said last month the UK economy was probably growing faster than his colleagues had expected in August.
Speaking at the Institute of Directors in Manchester on 5 October, he stressed that he had not yet made up his mind on how he would vote at the November meeting. However, given his comments and the better than expected growth rate for the third quarter, it seems unlikely that he would back another rate cut at this time.
I suspect the UK economy will be not too bad in the year ahead, with growth in 2017 more likely to be clearly above 1% rather than (as the consensus expects) below 1%.
I am not going to give you a forecast of how I will vote [at the November meeting]. It will depend on the data. Compared to the central forecast of the August inflation report, my views imply that the economy has more slack but will also grow more strongly. My policy vote will probably depend on which of these factors is dominating.
Ben Broadbent, deputy governor for monetary policy
Broadbent said the Bank had been too pessimistic about the immediate aftermath of the Brexit vote, but warned of an “insidious” threat to business investment.
Speaking at the Wall Street Journal’s London office on 5 October, he said:
The central projection in the August inflation report didn’t involve a recession, simply a slowing in the economy’s rate of growth. But that slowing looks so far to have been more moderate than we feared.
A lack of clarity about the UK’s future trading relationships needn’t result in visible, headline-grabbing closures of productive capacity. The effect is likely to be more insidious: decisions to expand, that might otherwise have been taken, are delayed.
