Sunday, June 01, 2008
Shadow MPC votes 8-1 to hold rate
Posted by David Smith at 09:00 AM
Category: Independently-submitted research

In its latest monthly E-mail poll (carried out in conjunction with the Sunday Times) the Shadow Monetary Policy Committee (SMPC) voted by eight votes to one to maintain UK Bank Rate at the 5% rate originally announced in April on Thursday 5th June.

The one dissenting SMPC member favoured a ¼% reduction to 4¾%. Looking further ahead, four of the SMPC holds had a bias to ease, two of the holders had a bias to tighten, and two holders and the sole rate-cutter had a neutral bias thereafter. All the SMPC members recognised that the UK monetary authorities faced a worsening dilemma, following the rise in consumer price inflation to 3%, when the problems in the market for credit had not been resolved, and the prospects for the global economy remained uncertain.

Several SMPC members discussed the extent to which previous errors by the Monetary Policy Committee (MPC) were responsible for the deterioration in Britain’s economic performance, as opposed to external factors and the profligate UK fiscal background, over which the MPC had no control.

Comment by Tim Congdon
(Financial Markets Group, London School of Economics)
Vote: Hold
Bias: To ease

For me the two most important pieces of news in the last few weeks have been the surge in oil prices and the Bank of England’s analysis of money supply developments in the last few years in its latest Inflation Report. I have been warning that the world faces a chronic shortage of oil for some time, but this year’s oil price move – to the highest-ever levels in real terms – has come as a surprise. Essentially, the price has increased from just over $90 a barrel to $130 a barrel since the end of 2007. This is a huge shock to the world economy, a transfer from oil consumers to oil producers equal to about $1¼ trillion or over 2% of world output. The transfer will be effected partly by a rise in prices, implying an impact effect on UK prices of at least 1%. Moreover, the pound is about 10% down on a year ago (in trade-weighted terms). If the price of oil stays up, the damage to UK inflation in, say, the two years from end-2007 can be quantified as perhaps ‘3% to 4% more (i.e., 1½% to 2% each year) than would otherwise have been the case’.

Wage increases have been surprisingly, and impressively, stable. It is difficult to believe that UK output is much above trend or that unemployment is significantly beneath the natural rate. Although domestically generated inflation is under control, I am against early interest rate cuts. Late 2008 will be tough for the UK housing market and parts of consumer spending.

The Bank of England’s chart on M4 growth on page 18 of the Inflation Report shows that – when the effect of intra-financial sector credit is removed – M4 growth surged in 2005 to 2007 to the 12% to 14% annual growth rate area, but is now plunging. The asset price fluctuations in this cycle look increasingly explicable. I feel fully vindicated in my concern – first expressed in mid-2006 – that excess money growth would again lead to a rise in inflation and an unnecessary cycle. Anyhow that is history. The implication of the current plunge in M4 growth is that corporate balance sheets will be squeezed for at least six to nine months and the UK economy may suffer one or two quarters of falling output. That is not really necessary. For 2009 I expect oil prices to be lower than now, with favourable effects on the main price indices. So by late 2009 inflation will benefit from both oil price movements and the impact of the mini-recession on the output gap (which may go negative). I am in favour of keeping rates at 5% for the time being, but expect to support rate cuts before the end of the year.

Comment by John Greenwood
(Invesco Asset Management)
Vote: Hold
Bias: To ease

Over the next few months the Consumer Price Index (CPI) inflation rate may well exceed 4% year-on-year for several months in succession. This is because the month-to-month increases in the middle of 2007 were very low, averaging only +0.06% per month over the period May-September.

Consequently the month-to-month changes will need to fall below the comparable figures of last year in order for the year-to-year rates to see any decline from the April figure of 3.0%. Even if inflation averages only 0.2% per month from May until the year end, the average inflation rate for the year as a whole will be 3.0%, well above the targeted 2.0%. But this is essentially history. It is now too late to do anything about any target overshoots in 2008.

The government, from Gordon Brown downwards, is busy blaming the global economic situation (the subprime or credit crisis, energy prices, and food prices) for the country's economic woes. When Mervyn King writes his next letter to the Chancellor he also will no doubt blame food and energy prices, and probably he will add the fall in sterling. But these are at best only superficial or “accounting” explanations for inflation. The deeper explanation is that within the UK the momentum of aggregate demand or spending was allowed to build up over a period of two or three years to the point where overall prices have been pushed up beyond the inflation target.

What caused overall spending in the UK to achieve this momentum? After all, domestic spending and inflation in Japan have been much more subdued, even though Japan has had substantially lower interest rates. One set of proximate causes is the extended rise in UK asset prices - especially equity prices and housing prices - between 2003 and mid-2007. Wealth effects have powered the spending that has caused the CPI inflation target to be exceeded. But what in turn pushed up asset prices?

Since the outbreak of the credit crisis it has become plain that the excessive leveraging up of both household and financial sector balance sheets over the past several years and the associated surge in property and security prices were a direct result of allowing the monetary aggregates (M4) and non-bank credit to grow too rapidly over a long period. Unless the excess funds are removed from the economy (e.g. by rapid de-leveraging), it is unavoidable that there will be a period of above-target inflation.

But, if the excess funds are abruptly removed from the economy, then the economic downturn will be exacerbated - as a sharp monetary slowdown would coincide with a period of higher inflation. Currently the data suggest that money growth is slowing, but not too drastically. This justifies keeping rates on hold. But if, as seems likely, money growth slows further, then interest rates may need to be cut.

For too long the official view has been that rapid monetary growth was confined mainly to non-bank financial companies’ holdings of M4, and that these would not impact on developments in the rest of the economy. Similarly the official emphasis has been almost exclusively on interest rates, not on quantitative measures of monetary growth. In future the MPC will need to find a framework which takes account of both the quantity of money (broadly defined) as well as interest rates in setting monetary policy.

Comment by Ruth Lea
(Arbuthnot Banking Group and Global Vision)
Vote: Hold
Bias: Towards easing

There are increasing and consistent signs of a weakening real economy. Though caution should always be exercised with monthly data, retail sales have slipped back in March and April (admittedly after a sharp growth in the first two months of the year) and the latest unemployment data ticked up. The credit crunch, with the three month London Inter-Bank Offered (LIBOR) rate staying well above Bank Rate, is undoubtedly impacting on the economy with the housing market arguably the most obviously affected area to date.

But the startling economic news in the last month has been the deteriorating inflationary picture with large jumps in producer price and CPI inflation rates, reflecting sharp rises in commodity prices. The Bank of England’s May Inflation Report was notable by its significantly more pessimistic forecasts of higher inflation (as well as weaker GDP) which led to newspaper banner headlines along the lines of “no more interest rate cuts until 2010”. Granted the inflation data are poor and the Governor’s letter writing skills will be well employed in letters to the Chancellor over the next year or so. Granted, too, that general inflationary perceptions and expectations are picking up. But so far, earnings inflation shows few signs of accelerating – a situation which is likely to continue, given the weakening labour market. Under these circumstances a price-wage-price spiral is unlikely to develop and there is still room for further cautious easing by the end of the year.

However, with rapidly rising inflation rates (CPI inflation is heading for 3¾% to 4% in the second half of the year), imminent cuts in interest rates can, and should, be ruled out. I vote for no change at the June meeting. But with a bias towards further easing.

Comment by Andrew Lilico
(Europe Economics)
Vote: Hold
Bias: Neutral

The current objective of monetary policy is unclear. Consider three kinds of inflation target. One is a band (e.g. 1% to 4%); a second is a point target without any restriction on how far from the point target inflation is permitted to go in the short-term; the third is a point target with a permitted band around it, outside which inflation is not permitted to go even in the short term. I (and everyone else) had thought the UK target a target of the third kind until early 2007. It now appears that the target is actually of (or has now changed to be of) the second type meaning the UK inflation target is a point target with no restriction on how high inflation is to be permitted to go in the short term, provided only that inflation return to the point target at some point in the future. Such a target seems to me to differ from pure discretion only insofar as there is communication concerning the intention of policy over the medium-term. Unlike the third kind of regime above, the UK's inflation target is no longer really one of constrained discretion (in any material sense of "constrained"). Instead, the UK operates under discretion-with-formalised-communication.

Discretion is by no means a stupid monetary policy regime. However, I believe that we can do better than relying on discretion and that at times such as the present it would be particularly useful to do so. Hence, my strong recommendation is that the government add to the point target for inflation a band of discretion around that point target outside which inflation is not to be permitted to go even in the short term. This would allow the market to understand policy much better. Perhaps the band of discretion should be 2% or even more either side of the target (instead of the 1% I thought - wrongly it seems - was the band of discretion before 2007).

The other issue that arises is what the 2008 and 2009 inflation targets should be. Given where we are, I see little merit (and much demerit) in having a 2% target for 2008 or 2009. I suspect that a 3.5% target for 2008 is now appropriate, and the 2009 target should be 2.5%. I have heard it argued that the target cannot be changed. I find this argument difficult to comprehend, given that the inflation target was changed as recently as 2003. If it was reasonable to change the target in 2003, why is it improper to consider changing the target for 2008 and 2009? When inflation targets were first conceived, it was to deal with situations precisely such as this, so that there would be a commitment to a series of (falling) inflation targets for some years ahead, specifying a rectification programme. That is what we now need in the UK - a clear set of targets specifying the UK's rectification path for inflation. Another thought is that increasing the inflation target would reduce credibility and raise inflationary expectations. I do not understand this claim. How can it be less credible to set a target that we expect policy to meet than for us to set a target that policymakers have no intention of trying to meet and that no-one believes there is any intention to meet? Isn't that almost the definition of lacking credibility? I also point out that the inflation expectations data has risen dramatically.

What ought to be happening now is that rates should have been raised much more aggressively in 2006 (as urged by this Committee) and should certainly not have been cut during 2007, so that we should now be able to cut rates. Instead, we face a situation in which it will seem very difficult to cut until inflation has peaked, unless the inflation target is raised. I find it very difficult to anticipate the appropriate policy in the current uncertain environment. I would like to be voting for cuts; yet at the same time it seems plain to me that the target we have actually been set calls for us to be raising rates (absurdly) at this stage. I am very disturbed that the warnings I and others offered for many months have not been heeded, and that the current dangerous situation has been brought about.

All I can see to do now is to wait until inflation peaks. Once that occurs, I will be voting for cuts. The slowdown in growth will be considerable, house prices falls will be considerable, and this pair will probably solve our current inflation problem for us. I find it very disappointing that we are now relying on technical recession or near-recession in order to meet our inflation target. I would have thought that a key purpose of the framework was that we avoided the need for such. However, we are where we are, and I see little option but to hold. Can the Chancellor please amend the inflation target, either specifying the band of discretion outside which inflation is not to go so that we have some guidance on whether and when our thoughts should eventually turn back to rate rises, or (perhaps better, now) set us new and appropriate inflation targets for 2008 and 2009?

Comment by Patrick Minford
(Cardiff Business School, Cardiff University)
Vote: Cut by ¼%
Bias: Neutral

There are currently two strongly-held views about the British economy. One is that inflation is serious and about to take off. The other is that the economy is plunging into deep recession because of the credit crisis. Views combining these two positions are rare but can be found too. In fact the inflation we are observing, which is clearly serious, is essentially due to a terms-of-trade shift against the UK. Commodity price inflation is being driven by loose monetary policy in several major emerging markets, China the worst, as well as by rapid growth for supply-side reasons. The fall in the exchange rate I interpret as a decline in the relative position of financial services in the world economy with the great credit unravelling.

What is most interesting and, I believe, predictable is the absence of response to this terms-of-trade shock by UK wages. Their growth has in fact declined since a year ago to 3.7%. The reason for the lack of response is that: a) the UK labour market is highly competitive these days, with high cross-border mobility, so the equilibrium real wage is unresponsive to largely shared terms of trade shocks (largely the same in Poland as here); and b) monetary policy is tied down by the medium term inflation target so that forward-looking workers and firms do not expect higher future inflation.

This implies that inflation is not about to take off (unlike say in the 1970s). In turn this conditions the outlook for the real economy. In spite of all the press comment it is still hard to find actual economy numbers that are particularly weak - in contrast to panicky surveys which are essentially just reacting to this comment. The economy is fully employed, profits are fairly strong, capacity utilisation is fairly high, and investment seems to be holding up. Even the housing market is not living up to its billing - the actual falls in prices are quite modest and the pressure is showing in volumes as people are taking their houses off the market in the expectation of firmer prices later.

Monetary policy here has been dominated by two mutually cancelling events. First there has been the sharp rise in the term premium due to the credit crisis; that has now fallen back a bit from its heights of around 100 basis points last autumn. Interestingly, the efforts of the major central banks to bring this premium down by a variety of direct liquidity injections have been in vain. The latest by the Bank of England, expected to reach £150bn with long maturities, explicitly keeps the term premium as a fee on the service and so exerts no direct downward pressure on it. Second the MPC has cut Bank Rate by 75 basis points. The net result of these two things has been to leave interest rates roughly unchanged from last July.

My view on the next Bank interest rate move is that it should be down. The downside risks to the economy still appear to be strong. The risk to inflation seems minimal. However, in these circumstances it is also important that the Bank preserves the credibility of the inflation target. Unfortunately this has been undermined by the shift to the CPI; the upward drift of the gap between index-linked and nominal gilts reflects the detachment of the RPI from the CPI. This should improve as house prices ease. The RPI was always a better index because it cannot be so easily manipulated by politicians; there is a powerful RPI committee with wide representation. The combination of the RPI gap from CPI and the idle chatter about how Darling and the Bank would like to sideline the inflation target could be dangerous. This is reinforced by the widespread failure to understand that the 1% to 3% range at which a letter is written has no status, as there is actually no technical range within which inflation has to be kept, only a commitment to bring it back over time to the target. So I would recommend only a small downward move of rates of ¼%, with no bias to ease until the inflation numbers improve.

Comment by Gordon Pepper
(Lombard Street Research and Cass Business School)
Vote: Hold
Bias: Probably hold next month too

The seeds of inflation are sown about two years before the inflation becomes apparent. It is too late to stop the current rise. The cure is always painful. Policy should be aimed at minimising the pain and not prolonging it. However, the credit crunch will provide the remedy. The authorities need not tighten policy further. Indeed, my guess is that the credit crunch will be over-kill. Over-kill suggests that interest rates can be lowered to reduce the pain. This would not be wise at the moment. The trade unions are almost bound to be militant in a vain attempt to keep their members’ after-tax income rising in line with inflation. Reducing interest rates would encourage militancy, which would prolong the pain. The best course of action is to leave interest rates unchanged for the time being and for the monetary authorities to stand ready to act decisively when the time comes to reduce them.

Reducing short-term interest rates is not the only weapon at their disposal. The Bank of England has already deployed a weapon that it does not normally use. On two occasions recently it has supplied more reserves than the banks wanted. But will they use them? You can lead a horse to a trough but you cannot make it drink. The Bank of England pays interest on the balances that banks keep with it, that is, on their reserves, which encourages them to sit on reserves. Banks would be encouraged to drink if the interest rate was reduced. The weapon of last resort is for the authorities to make quite sure that the money supply (M4) grows at an adequate rate by under-funding, that is, by selling less gilt-edged stock than is needed to finance the budget deficit. If necessary the authorities can purchase gilt-edged stock previously issued, corporate bonds or even equities. This is the cure for debt-deflation that Irving Fisher proposed in the early 1930s. It will become extremely important if all else fails.

Postscript: The Debt Management Office

When the Labour Government came to power the previous functions of the Bank of England were split into three. The MPC was given the task of setting interest rates. The supervision of banks was passed to the Financial Services Authority (FSA). Managing the gilt-edged market was passed to the Debt Management Office (DMO). It is generally acknowledged that a lack of precision about the roles of the Bank of England and the FSA contributed to the Northern Rock crisis. There is a danger that a similar muddle could occur between the Bank of England and the DMO. The roles of the Bank of England and the DMO certainly need clarifying.

Comment by David B Smith
(University of Derby and Beacon Economic Forecasting)
Vote: Hold
Bias: Tightening

One advantage of having an in-house econometric model is that it gives one the courage to go out on a limb. Once an oil price assumption of over US$110 per barrel of Brent Crude was fed into the Beacon Economic Forecasting (BEF) model of the international and global economies it was clear that the UK inflation target was a dead duck, not just this year but in 2009 and, probably, 2010 also. One reason many people seem to have been caught by surprise by the acceleration in CPI inflation in April, was that the oil price assumption incorporated in the consensus forecast was too low. This may, in part, reflect publication delays when the oil price has been rising rapidly. Rather surprisingly, only twenty out of the forty-four forecasting groups whose predictions appear in the monthly comparison of independent forecasts compiled by HM Treasury reveal their oil price assumptions. This makes it impossible to work out the assumed oil price that underlies the consensus inflation prediction. However, the May 2008 HM Treasury consensus forecast reveals that the average oil price assumption made by the twenty forecasters who submitted this information was US$101.5 for this year, followed by US$93.1 in 2009. These figures compare with the US$128.3 recorded on 27th May. There may be an element of speculative overshooting in the current price of oil, although the 21st May MPC minutes argued that this was not a major factor. However, the mean assumption that the oil price will be US$35¼ lower next year may explain why more alarm bells have not been ringing on the inflation front. Plugging a ‘compromise’ US$115 assumption into the BEF model gives a CPI inflation projection of 3¼% in the final quarter of this year, 3¾% in 2009 Q4 when the lagged effects of this year’s fall in sterling will be most potent, and 3½% in the closing three months of 2010.

In theory, oil price shocks represent relative price changes, not absolute ones. Oil price hikes do not help matters in the short run, and may worsen the inflation/output trade off for a couple of years. Even so, their impact on output should eventually prove transitory, provided that the supply side is not harmed by harmful political responses and protectionist forces are kept at bay. Nevertheless, a transitory inflation shock can induce a permanent rise in the international price level, and possibly its rate of change, if the global money supply rises to accommodate it. Because money is endogenous in the BEF forecasting model, for example, inflation shocks get built in unless the monetary authorities raise real interest rates to offset this tendency. In practice, central banks have been cutting rates and the current real three-month rate of interest in the world as a whole appears to be zero. This explains why the annual growth of the OECD broad money supply accelerated to 8¾% in 2008 Q1, representing the fastest increase since 1990, when OECD inflation averaged 4.9%. The low cost of carry associated with zero real interest rates is also a reason why there has been so much speculative activity in all commodity markets, not just that for oil. Financial speculators need – and aggressively lobby for - cheap money the way airlines need cheap aviation fuel. It is not necessarily in the interests of society as a whole that central banks supply it.

The UK national accounts data, released on 23rd May, confirmed that real GDP rose by 0.4% in the first quarter, and was 2.5% higher on the year. However, this measure still seems to be understating the strength of the private sector component of activity on which monetary policy operates. This is because of weak oil production and a sluggish expansion of measured government output. Non-oil GDP rose by 0.5% on the quarter and 2.6% on the year in 2008 Q1, while non-oil market sector gross value added increased by 0.5% to a level 3.0% up on the first quarter of 2007. One would have to be sanguine about the growth of UK productive potential not to regard this as being on the high side of trend, especially now that Poles are returning home because of the pound’s collapse against the Zloty.

Sterling remains weak, there is a growing policy inconsistency between the irresponsibly lax UK fiscal stance and the monetary regime needed to bear down on inflation, and the trade figures remain dire. In addition, the CPI is running some 0.4 percentage points below the rate that one would expect from the ‘double-core’ retail price index excluding mortgage rates and house prices - which rose by 3.9% in the year to April - suggesting that there could be an adverse catching up at some point. RPIX inflation, at 4%, was above its old target range for the third consecutive month in April, when the ‘headline’ RPI inflation rate was 4.2%. Overall, there is little concrete evidence that the UK economy is heading for a hard landing, let alone a crash. Furthermore, some slowdown from the heady pace of recent years was both inevitable and desirable. Things have not yet reached the point where higher interest rates are immediately desirable and there remain serious downside risks. However, I maintain a strong bias to tighten in the medium term, if higher rates are not forced on the authorities by speculative shorting of the pound. This looks like an increasingly probable scenario, as the credibility of the British political authorities and their sense of fiscal responsibility sink ever lower.

Comment by Peter J Warburton
(Economic Perspectives Ltd)
Vote: Hold
Bias: Cut sharply on evidence of a material loss of economic momentum

The release of a 3% headline inflation rate for the April CPI has sparked some wildly differing reactions. For some, it is an understandable reflection of the acute pressures on prices of internationally traded energy and commodities, aggravated by the abrupt relaxation of the US monetary stance. As such, it prompts no particular change of direction. For others, it is an affront to the UK policy framework and must be countered by an immediate interest rate increase. This latter reaction may appear logical, yet it neglects the broader context of: (a) the legacy of many years of excessive M2 money stock and household credit growth in the UK, which by implication contradicted the supposed commitment to low inflation; (b) the potential for the global economy to slow dramatically as a result of the credit crunch; and (c) the likelihood that the UK economy will suffer disproportionately as a result of its openness, the strong representation of the financial sector in its economy and the severe exposure to the decimation of structured credit .

To those who dismiss all three of these concerns, the way is clear to remove the easing bias and even to withdraw the 75 basis points of easing that has occurred since last December. But for those of us who place significant weight on all three considerations, there remains an expectation that UK Bank Rate should fall in order to moderate the overly-restrictive credit conditions facing the UK private sector. Specifically, the real rate of interest with respect to private sector inflation (ex-energy) is still well above 3%. Even more important than the price of credit is its availability which remains tightly rationed. On a strong view of the Special Liquidity Scheme, announced in April, there should be no further need for Bank Rate reductions on the grounds of unintended tightness, but it is an empirical issue whether the Scheme will be successful in eliminating the excess LIBOR-Overnight Index Swap spread.

The key issue is whether the UK is about to suffer a sudden loss of momentum, such that GDP will soon show quarter-to-quarter falls and next year, a negative annual growth rate. This is my central expectation, based on the lagged effects of the constriction of credit on transaction activity, the real income squeeze exerted by soaring food and energy prices and the lack of scope for fiscal relaxation. If there were to be “no rate cuts until 2010” as the Financial Times interpreted the latest Inflation Report, then this would reinforce my downbeat expectations.

However, it is quite conceivable that this contraction of economic activity will have little impact on the profile of CPI inflation outturns over the coming year. It is a fallacy to believe that the UK operates as a giant factory at varying levels of capacity utilisation. It is highly probable that CPI inflation will exceed the 3% upper bound frequently in the coming year. There may be no level of UK Bank Rate that will prevent it happening. The deeper reality is that inflation targets operate as an expectations reinforcement mechanism. Interest rates are a signalling tool, not a deterministic control.

Given that the Bank of England has a clear interest in defending its inflation target, even if failure is inevitable in the near-term, it would be very difficult to justify a rate cut in present circumstances. The time to cut Bank Rate aggressively was in the interval from September 2007 to March 2008 and indeed this was my preferred course of action. The landscape has altered materially as a consequence of the sharp ascent of oil prices and energy utility prices. These have accentuated the downside risks for the economy. As and when this scenario of sequentially negative GDP materialises, another opportunity will arise for cuts in the Bank Rate.

Comment by Trevor Williams
(Lloyds TSB Corporate Markets)
Vote: Hold
Bias: Strong bias to raise

I am amazed at how complacent everyone has been about inflation in the developed world and about oil prices, in particular. Current international inflation figures are a clear sign that monetary policies in the UK, in the Euro-zone and in the US were too lax two to three years ago. Central banks did not take appropriately tough decisions then and they are not taking them now. The cut to a 4½% Bank Rate in the UK was mistake and keeping it there for a whole year thereafter was an even bigger one. The fast growth in M4 was a warning as many of us pointed out. The widening trade deficit was another one. The strength of the pound was illusory, and led to pent up inflation that was waiting to burst free. Now that it has, we have another inflation impulse to take account of going forward. But even now, you get calls for rate cuts. What madness. As has been said many times by some SMPC members, the credit crisis is a red herring; the real risk is inflation, even with the credit crisis interest rates should not be cut much. Losses amongst financial firms are not reasons for loosening monetary policy rates. Illiquidity should be dealt with by employing appropriate non interest rate tools.

As far as the June rate decision is concerned, I have a strong bias to raise rates, but wish to hold for the time being. The reason is that UK rates are close to neutral and the measures to deal with the credit crisis are not yet fully in place. The bank should announce a £150bn facility and accept ABS as collateral. Once that happens and LIBOR rates are at a more normal margin above Bank Rate, the MPC should concentrate on getting inflation back to target.

What is the SMPC?

The Shadow Monetary Policy Committee (SMPC) is a group of independent economists drawn from academia, the City and elsewhere, which meets physically for two hours once a quarter at the Institute for Economic Affairs (IEA) in Westminster, to discuss the state of the international and British economies, monitor the Bank of England’s interest rate decisions, and to make rate recommendations of its own. The inaugural meeting of the SMPC was held in July 1997, and the Committee has met regularly since then. The present note summarises the results of the latest monthly e-mail poll, conducted by the SMPC in conjunction with the Sunday Times newspaper.

SMPC membership

The Secretary of the SMPC is Kent Matthews of Cardiff Business School, Cardiff University, and its Chairman is David B Smith (University of Derby and Beacon Economic Forecasting). Other current members of the Committee include: Patrick Minford (Cardiff Business School, Cardiff University), Tim Congdon (London School of Economics), Gordon Pepper (Lombard Street Research and Cass Business School), Anne Sibert (Birkbeck College), Peter Warburton (Economic Perspectives Ltd), Roger Bootle (Deloitte and Capital Economics Ltd), John Greenwood (Invesco Asset Management), Peter Spencer (University of York), Andrew Lilico (Europe Economics), Ruth Lea (Arbuthnot Banking Group and Global Vision) and Trevor Williams (Lloyds TSB Corporate Markets). Philip Booth (Cass Business School and IEA) is technically a non-voting IEA observer but is awarded a vote on occasion to ensure that a full set of nine votes is always cast