In its latest E-mail poll the IEAs Shadow Monetary Policy Committee (SMPC) voted to keep UK Bank Rate unchanged on 8th January. In particular, six members voted to leave Bank Rate unaltered at 2%, two SMPC members favoured a cut to 1%, and one argued for a 0.5% reduction.
There was a general view that the benefits from further cuts in Bank Rate were subject to rapidly diminishing returns and that there was a need to use additional monetary instruments. One suggestion was that the remit of the Debt Management Office (DMO) should be altered to allow the government to borrow directly from the banking sector, in order to boost bank liquidity and the broad money supply.
Several SMPC members criticised the governments incoherent and damaging approach to the banking system. In particular, senior politicians populist demands for lower borrowing costs were logically incompatible with the need to re-capitalise the banking sector. The SMPC poll was closed on Tuesday 30th December.