SMPC Votes to Hold Interest Rates

The IEA's Shadow Monetary Policy Committee (a group of leading economists that meets to monitor monetary policy and comment on other monetary matters) voted narrowly by five votes to four to hold interest rates at its October meeting.

One of the four members who did not want rates to increase would have preferred a 0.25% cut.

A majority of the SMPC believed that, as inflation was at the bottom of its target range, it would be wrong to raise interest rates at the moment. To do so, might risk inflation falling too far below target. Whilst some of the five members who voted for rates to remain on hold indicated that they may well support an increase in rates over the coming months, as more data became available, there was concern expressed about the weakness of the private sector.

Prof. Patrick Minford said, “The latest information we have indicates a pretty general slowing in UK and also in world growth. Also it is clear that rising oil prices are having no positive effect on wages and instead are being absorbed in lower price margins and even wages. Hence the fears initially expressed quite widely that we fac