In its latest poll, the IEAs Shadow Monetary Policy Committee (SMPC) voted by seven votes to two to leave Bank Rate unchanged at its present 0.5% when the Bank of Englands rate setters meet on Thursday 8th April. The two dissenters both voted that Bank Rate should be raised to 1%, while recognising that any such rate change was unlikely so close to a general election. There was a widespread agreement amongst the SMPC membership that the 24th March Budget had not made the fiscal backdrop to monetary policy significantly worse than it was already. However, there was more debate as to whether high government spending and the large fiscal deficit provided a useful support for private sector activity or, alternatively, was crowding out the non-socialised sector of the economy and exacerbating the recession. Some SMPC members thought that, in the absence of the detail provided by the urgently required Comprehensive Spending Review, the governments commitment to enhanced spending discipline in the future was no more than an unrealisable paper promise.
There was also debate among the shadow committee as to whether Quantitative Easing (QE) should be resumed after the forthcoming election. Here, views were also mixed. Five members thought that the economy remained so weak that a resumption of QE probably would be required while two thought that the authorities should stan