SMPC Votes to Raise Interest Rates

For Immediate Release. 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 to increase interest rates at its April meeting.

A number of members believed that a 0.5% immediate increase was warranted because of the strength of the housing market but, after debate, members accepted a proposal to increase rates by 0.25% to 4.25%.

The majority of members felt that there were severe dangers to the UK economy arising from the level of house prices. Some members believed that interest rates should be raised to prevent a house price bubble getting more severe as there would be serious consequences for the economy if that were to happen and if the bubble subsequently burst. Other members believed that the rise in house prices was an indicator that monetary policy needed tightening to prevent inflation getting out of hand.

Members Roger Bootle, Dr. Lilico and Prof. Congdon believed that the situation was serious enough to warrant a 0.5% increase in interest rates. Three other members supported a smaller rise, with the likely rise in interest rates overseas being cited as another supporting reason for an immediate rise in UK interest rates.