In its latest poll, the IEA Shadow Monetary Policy Committee (SMPC) voted by five votes to four to leave Bank Rate unchanged at 0.5% when the Bank of Englands rate setters announce their decision on Thursday 10th June. This narrow margin is the closest that the SMPC has come to advocating a rate rise for a long time. All four of the dissenters voted that Bank Rate should be raised by 0.5% to 1%. There was no strong bias as to where rates should go in subsequent months, or whether Quantitative Easing (QE) needed to be re-activated. Some rate hawks believed that further rises beyond 1% would be necessary, although no-one was advocating a rapid return to the so called neutral rate of 4.5% to 5%. It was also believed that the authorities should be on standby to re-activate QE if the economy proved unexpectedly soggy.
There was widespread agreement among the members of the shadow committee that the fiscal situation inherited by the Conservative-Liberal coalition could not be sustained and risked placing unsupportable obligations on future generations unless they chose to default at some stage.
The 22nd June Budget and the autumn