Shadow SMPC Meeting

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Attendance: Dr. Andrew Lilico, Prof. Gordon Pepper, John Greenwood, David B. Smith (Chairman), Prof. Tim Congdon, Prof. Patrick Minford, Roger Bootle, Dr. Peter Warburton, Prof. Forrest Capie, Allister Heath (observer), Prof. Philip Booth (IEA)


30 April 2004

For Immediate Release

Shadow MPC Votes to Raise 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 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. The strength of the US economy indicated that there would be a rate rise in the USA in the near future.

Other members of the SMPC, specifically, Prof. Minford, Prof. Capie and Dr. Warburton, believed that the level of house prices simply reflected real factors, such as a lack of supply and the buy-to-let phenomenon and that inflationary pressures and monetary growth were sufficiently subdued to make a rate rise unnecessary.

Overall, the SMPC voted six votes to three for a 0.25% rise in interest rates to 4.25%. A motion to increase interest rates by 0.5% was defeated, also by six votes to three.


Notes to Editors

The Minutes of the meeting are attached. Minutes of all recent Shadow Monetary Policy Committee meetings are available from in the articles section.

The Shadow Monetary Policy Committee, which has shadowed the MPC since its creation, has no relationship with the recently formed Times Shadow Monetary Policy Committee

Contact: David Smith

Tel: +44(0) 20-7898-2402

Fax: +44(0) 20-7410-9932


Other members can be contacted through Philip Booth at or 020 7799 8912

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