In its poll closing Wednesday 2nd July, the Institute of Economic Affairs (IEA) Shadow Monetary Policy Committee (SMPC) recommended by eight votes to one that Bank Rate should be raised on July 10th, including five votes for a rise of ½% and three for a rise of ¼%.
Those advocating a rise acknowledged that the economy is not yet over-heating, money growth is low, and inflation overshoots are not an immediate risk. They did not propose raising rates to cool down the economy but, instead, sought to withdraw some of the excess monetary stimulus introduced at the time of the financial crisis so as to allow the price mechanism to allocate loans and capital. The current strategy of keeping interest rates very low whilst using bank regulation to prevent money and credit growth was loudly condemned.
For several of the members the Bank of England has already waited far too long before raising rates, with some criticising its “neglect” whilst others focused upon the confusion created by the signals from forward guidance. The main way to signal should be by changing a pr