SMPC votes to hold interest rates - August 2008

SMPC votes six to three to hold interest rates - but believes the Bank must be ready to cut in the future

Following its latest quarterly meeting the IEA's Shadow Monetary Policy Committee (SMPC) voted to leave Bank Rate unchanged on Thursday 7th August. Six members of the shadow committee voted for rates to remain on hold, while three members voted to cut the official interest rate by 0.25%. The vote itself understates the underlying ‘dovishness’ of the committee, however, since all three cutters had a bias towards further reductions, three of the holders had a bias to cut aggressively in future months, and a further holder had a bias to ease. In contrast, only two of the SMPC members who voted to hold Bank Rate on 7th August had a bias to tighten in subsequent months.

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