Wednesday, August 20, 2008
Bank in another three-way split
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

As expected, the two academics on the Bank of England's monetary policy committee (MPC) again went their separate ways earlier this month, Tim Besley voting for a quarter-point rate hike and David "Danny" Blanchflower, voting for a cut. The majority, seven, opted for no change, in line with the projections in the Bank's August inflation report. Either Besley or Blanchflower may turn out to be right in the end, but not both of them.

The case against a hike, by the majority of committee members, is made quite strongly in the minutes, suggesting they are happy to remain on hold for the time being. The minutes say: "The main risk would be that an unexpected rate rise might adversely affect business and consumer confidence, adding to the near-term downside pressures on activity and causing a material undershoot of the inflation target in the medium term. Although rates could be cut later in that event, the downturn would be unnecessarily deep, adding to the volatility in the economy." The minutes are here

Also today, the July public finances eased some of the pressure on the government, showing a current budget surplus of 6.6 billion. But this was 2 billion lower than a year earlier and cumulatively, the public finances are 9.3 billion further into the red than in the first four months of the 2007-8 fiscal year. The release is here.