In its latest monthly poll the IEA's Shadow Monetary Policy Committee (SMPC) voted by eight votes to one to hold UK Bank Rate at 5% on Thursday 10th July. The one dissenting SMPC member favoured a 0.25% reduction to 4.75%. Looking further ahead, six of the SMPC holds had a bias to ease, two of the holders had a bias to tighten, and the sole rate-cutter had an easing bias thereafter.
All the SMPC members concerned recognised that the Monetary Policy Committee (MPC) of the Bank of England faced the most difficult situation that has arisen since the present British institutional arrangements were established eleven years ago. In particular, the rise in Consumer Price Index inflation to 3.3%, when the problems in the market for credit had not been resolved, and the prospects for the global economy remained uncertain, left the authorities facing an acute dilemma. Some SMPC members were concerned by the rapidity with which the UKs broad money supply and credit were decelerating. There was also some discussion as to how far previous errors by the MPC were responsible for the deterioration in Britains economic performance.