In its most recent meeting, finalised on 25th November, the Institute of Economic Affairs (IEA) Shadow Monetary Policy Committee (SMPC) decided by seven votes to two that Bank Rate should be raised on Thursday 5th December. Four SMPC members voted for a 1⁄4% increase, three members voted for a rise of 1⁄2%, and two wanted to leave rates unaltered. This pattern of votes would deliver an increase of 1⁄4% on the usual Bank of England voting procedures.
There were two main reasons why a majority of the SMPC thought that it was now necessary to start a gradual and phased process of raising Bank Rate towards a more normal level. One reason was the feeling that the hyper-low interest rates appropriate in the ‘lender of last resort’ period some half-a-dozen years ago were no longer required. In addition, it was feared that such abnormally low rates of interest were encouraging financial and property speculation at the expense of savers and genuine wealth-creating investment and damaging potential growth in the longer term. A second reason