Sunday, September 06, 2009
Hold Bank rate, extend QE, says shadow MPC
Posted by David Smith at 08:59 AM
Category: Independently-submitted research

In its latest e-mail poll the Shadow Monetary Policy Committee (SMPC) voted to leave Bank Rate at ½% when the Bank of England’s rate setters meet next on
10th September.

The unanimous SMPC vote reflected the belief that there was no immediate case for a rate increase – although one member thought that Bank Rate needed to be raised to 2% before the end of this year if inflation was to remain subdued through 2010 - combined with the view that Quantitative Easing (QE) still remained the most effective monetary policy instrument available to the authorities.

A strong majority of SMPC members believed that the total assets purchased under QE would ultimately need to be raised to significantly over £200bn and, perhaps, up to £300bn. These figures are well above the £175bn to which the Bank of England committed itself at its August meeting and also greater than the £200bn that the Governor and two external MPC members had argued for, although they were outvoted in the event.

The SMPC poll was largely completed before the late-August bank holiday weekend, although most members were aware of, and some referred to, the revised second quarter GDP figure, announced by the UK Office for National Statistics (ONS) on 28th August.

Most members of the shadow committee believed that the downwards momentum in the UK economy was ameliorating, and that recent surveys painted a more promising picture for activity in the third quarter. However, there was also concern that the restoration of the higher 17½% rate of VAT next January, the increased National Insurance Contributions to be implemented next April and the pressing need for a major fiscal retrenchment would all act as a serious drag on home demand during the course of 2010 and 2011.

Comment by Roger Bootle
(Deloitte and Capital Economics Ltd.)
Vote: Hold
Bias: To hold rates indefinitely and to increase QE further

Although some sort of recovery seems to be underway, it is probably extremely fragile. The chances that it will fizzle out are very high. Moreover, next year there will surely be announced a very severe fiscal tightening. In these circumstances, it is imperative that monetary policy be kept highly supportive of demand. It would not surprise me if interest rates needed to be kept at the current near-zero level for five years or even longer. And the Bank of England should stand ready to increase its Quantitative Easing (QE) programme massively.

Comment by Tim Congdon
(International Monetary Research Ltd.)
Vote: Hold
Bias: Neutral

Recent announcements from the Bank of England on QE and interest rates are encouraging in substance. Official policy is clearly to ensure that broad money growth stays positive enough both: 1) to deliver an economic recovery; and 2) to prevent the UK being visited by the deflation that already afflicts most of the industrial world. This is good news for UK equity and real estate markets, but unhelpful for gilts.

However, the accompanying publications – the August Inflation Report and the latest MPC Minutes – are riddled with qualifications, reservations and provisos. Any commentator has to wonder whether the MPC’s members and Bank staff really believe in the new official emphasis on the desirability of a positive and steady rate of broad money growth. The main worry is that banks’ efforts to raise capital/asset ratios may – by causing them to shed assets and so reduce the growth of their deposit liabilities – neutralise or even offset the increase in deposit liabilities (i.e., in M4) that arises from QE. The subject is technical and journalists will allege that the slow money growth shows that “QE has failed”. Officialdom ought to tell the banks that the move to higher capital/asset ratios can be phased in over several years, so that any resulting contraction in their balance sheets proceeds slowly and is outweighed by expansionary influences.

As has been widely recognised, the money holdings of so-called intermediate Other Financial Corporations (OFC’s) need to be deducted from M4 to arrive at a M4 number (i.e., “M4x”) relevant to behaviour by private sector non-banks. In the four months to June the change in M4x was rather disappointing, with no increase in its growth rate compared with the previous four months despite the huge official purchases of gilts. But this does not mean QE was pointless. Without QE money balances would almost certainly have fallen, implying continuing severe pressures on company liquidity. The initial July money numbers were for a rise of 1.0% in M4, which seems to be encouraging, but we need the M4x figure and other information to be fully confident that a positive rate of monetary growth is being restored.

The Bank of England is ‘muddling through’, in typical British fashion. The UK is likely to come off lightest, of the main advanced countries, in the Great Recession of 2008 and 2009. I largely agree with the conduct of monetary policy at present, including keeping base rate at ½% and pursuing a further £50bn or so of asset purchases before the end of October. My main caveat – as before – is that it would be simpler for the government to borrow from the UK banks and for the state to create money that way, instead of the key operations being conducted by the Bank of England.

Comment by John Greenwood
(Invesco Asset Management)
Vote: Hold Bank Rate at ½%; maintain current QE target
Bias: Extend QE beyond £175bn after November

QE is not raising the level or growth of M4x (M4 excluding intermediate OFCs) as quickly as the Bank of England or some of its proponents had hoped. The reason is de-leveraging. When some households and commercial and industrial companies acquire additional deposits, they are using those funds to pay down debt. This causes the balance sheets of banks to shrink by a corresponding amount and monetary growth to be slower than it otherwise would be. Unless banks replace those loan repayments with other assets (e.g. new loans or additional holdings of securities), bank balance sheets will shrink, and money supply growth will slow or actually decline.

Using a few simple assumptions, we can estimate how much de-leveraging might be undertaken by the household sector and, consequently, how much QE will be needed to replace that amount of household debt repayment. The Bank’s estimate of M4x in 2009 Q1 was £1,532bn. Assume that household’s disposable income grows at 3% p.a. over the next few years. Suppose also that households wish to reduce their gearing from a debt-to-disposable income ratio of 172% in 2009 Q1 to 142% by the end of 2012 (approximately the same level as in 2004). This implies that households will need to de-leverage by £123bn. If there is no change in UK non-financial corporate borrowing and no growth in bank holdings of securities, then on its own this household de-leveraging would reduce M4x to £1,409bn, a decline of 8.0% over three and three-quarter years. It is this tendency for the money supply to shrink under de-leveraging that QE must counterbalance.

This also explains why, in my view, the majority (six-member) vote in the recent August MPC meeting to increase Asset Purchases by £50bn to £175bn by November was inadequate and accompanied by too short a time horizon. The minority vote (three members including the Governor) was for a larger £75bn increase in Asset Purchases or QE to £200bn. But even that would not have been enough. The brief analysis above suggests that QE will be needed for several years to offset what is likely to be a prolonged period of de-leveraging. A more appropriate outcome would therefore have been to have extended QE by another £150bn (over the original £150bn) for a total of £300bn and to have set the target date for accomplishing this as mid-2010, which would have allowed the gilt market and other related fixed income markets a longer period of stability. Instead there will now be another series of shocks to the gilt-edged market in the run-up to end-November, just as there was in the run-up to the August meeting of the MPC whenever MPC members discussed in public whether or not they would be extending QE.

After a prolonged period of over-borrowing, the UK private sector requires an extended period of balance sheet repair. It is impossible to know in advance how much de-gearing this entails, but the brief discussion above shows that it could be substantial and prolonged. The MPC can help the process by making sufficient funds available over a reasonable time period and not vacillating over small, incremental increases of the Bank’s balance sheet every quarter.

Comment by Patrick Minford
(Cardiff Business School, Cardiff University)
Vote: Hold
Bias: Neutral on rates but QE programme should continue at present rate until credit/money growth returns to normality.

The indicators have become generally more positive in the past months. This, as I have argued throughout this crisis, is not surprising, given the size of the monetary and fiscal stimulus that has been applied across the world. The doomsters have now switched to muttering about ‘double dips’. But the truth is that we have no basis for expecting economies to ‘double dip’. The dynamics of economies that are recovering from shocks are fairly straightforward: gradual improvement, radiating out through the usual channels of transmission.

To get a double-dip one needs a further negative shock, quite a large one given the size of the ongoing public stimulus. However, this is now unlikely. The main candidate would be a further financial collapse but with government committed to supporting financial institutions, that fox has been shot. In any case, the financial sector has been recovering fastest. Another possible candidate would be a sudden withdrawal of public support. Some commentators would like to see this happen - as they put it, ‘exit strategies’ should be implemented soon to avoid a resurgence of inflation. However, central banks and governments are naturally and rightly cautious about premature ‘exit’ when the indicators while improving remain far from robust. Indeed, there were plenty of examples of premature exit during Japan’s ‘lost decades’ which have meant that Japanese deflation has not to this day been cured; this has come on top of a damaging absence of supply-side reform.

I have argued before that automatic exit strategies are supplied by the inflation targeting commitments of most governments today. While there has been some discussion of using the ‘inflation tax’ to erode rising levels of government debt, it has not been given much encouragement either by major politicians or by public opinion which remains very hostile to inflation. The most likely scenario is that recovery will proceed and strengthen over 2010 and sometime during that year or early in 2011 interest rates can rise again and renewed restraint be put on credit and money growth. Inflation will continue to fall in the near term in most economies and even as the recovery reaches this stronger stage it will be held down by expectations of tightening monetary conditions. As this tightening occurs, so central banks’ balance sheets will contract as loans they have made are repaid. There is no ‘inflationary cliff’ opening up at our feet.

One argument one hears is that fiscal debt positions are unsustainable and must precipitate an inflationary crisis. However, public opinion in the US and the UK, where debt is rising fastest, is braced for cuts in spending growth, even in absolute spending levels, after years of profligacy. Also recovery will restore revenue growth, just as it is recession that has destroyed it. We have seen again in the UK, as in the 1990s, just how responsive the public finances are to the business cycle. Public debt will level off at a much higher percentage of GDP and it will not fall from this percentage until there is another boom in the economy.

Such a boom is a long way off because of raw material shortages. There will need to be a decade or so of innovation in materials and their use before the world can once more grow at the heady rates of 2003-2007. Already oil has risen back over $70 a barrel even while the world economy is still in the early tentative stages of a return to health. The crisis of 2007/8 put paid to such fast growth, not because of the aftermath of demand collapse in the crisis but because of solid supply-side constraints that were shown then to be fatally binding.

Comment by Gordon Pepper
(Lombard Street Research and Cass Business School)
Vote: Hold but Government should purchase assets from the private sector
Bias: Neutral but increase QE to £200bn

The aim of quantitative easing (QE) is to ensure that monetary growth is adequate. The growth of broad money should be kept as close as possible to the range of 6% to 8% per annum. The correct way of judging whether QE is too much, too little or about right is to monitor current monetary growth.

A difficulty is that current data for M4 are distorted by quasi inter-bank transactions. The Bank of England is now publishing data for M4x that excludes them. The M4 holdings of households and of private non-financial corporations should also be monitored. It should be stressed that the monetary series are inherently erratic and that fluctuations that last less than about six months are irrelevant. Attention should be focused on twelve-month rates of growth. The six and three-month rates of growth do however provide some indication of whether a recent trend in the twelve-month rate is likely to continue or reverse.

The conclusion is that quantitative easing has been inadequate. The MPC were wrong to discontinue it in July and the members who out voted the Governor last month, arguing for a £50 billion increase rather than £75 billion, were incorrect to do so.

Comment by Peter Spencer
(University of York)
Vote: Hold
Bias: Expand QE and take other radical measures

Asset markets have continued to recover strongly over the summer, especially the equity markets. This will support the economy by reversing the pressure on personal wealth and the cost of capital. However, there seems very little to support such strong optimism. The Bank of England’s Asset Purchase Programme may have been supportive, but this effect has surely been overwhelmed by the contraction of lending to the private and overseas sectors, which leaves credit and monetary aggregates looking dangerously weak. It seems that expectations of recovery are running well ahead of reality, leaving the markets prone to relapse.

The Bank of England’s August Inflation Report continued to warn of a “slow and protracted” recovery. However, in spite of the downbeat tone of the press conference, the GDP projections were revised up, particularly for 2010. These seem highly optimistic, even when taking into account the boost from the weak pound. The Governor stressed the rapid increase in the margin of spare capacity, suggesting that firms would want to reverse this quickly. However, I must be missing something. With consumers cashed-out, government in serious deficit and our major export markets in the doldrums, it is hard to see any serious potential for a recovery in demand. Credit remains restricted and this is putting increasing pressure on companies and consumers. Funding costs have fallen back, but spreads continue to widen. The Bank’s latest Trends in Lending publication reported that net lending to UK businesses fell by £3.4bn in May, on top of a £6bn decline in April. New mortgage approvals are edging up, but lending to households also remains severely restricted.

Although inflation has surprised on the upside, the Inflation Report still sees significant downside risks there and acknowledges that the CPI may undershoot the 2% target by more than 1% for a sustained period. Reflecting this, the Monetary Policy Committee voted 6-3 to expand the quantitative easing (QE) programme by £50bn at its August meeting. The option of a £75bn increase in the quantitative easing programme was also debated. This should have come as little surprise. The minutes revealed that the MPC believed “The potential adverse consequences of adding another large monetary stimulus might be less severe than the possible costs of acting too cautiously.”

I am of a similar persuasion. The weakness of demand and the large margin of spare capacity will exert significant deflationary pressure on the economy. I suspect that the QE programme will have to be expanded further once the current round of purchases is completed in October. Other radical measures should also be considered. Charles Goodhart has suggested that a negative interest rate should be paid on bankers’ balances, and the Swedish Central Bank has already announced a rate of minus ¼%. Bank Rate could be further reduced as part of such an announcement. Certainly there is very little prospect of a higher base rate until at least the end of next year.

Comment by David B Smith
(University of Derby and Beacon Economic Forecasting)
Vote: Hold
Bias: Neutral: M4x data is inadequate to monitor QE and must be improved

The Organisation for Economic Co-operation and Development (OECD) and the UK Office for National Statistics (ONS) both re-based their economic data series this summer, obliging a wholesale re-estimation of the statistical relationships in the Beacon Economic Forecasting (BEF) model of the international and UK economies. All macroeconomic modellers hate such data enforced re-estimations because it is impossible to maintain appropriate statistical rigour when re-estimating numerous equations against a deadline. However, one benefit from re-estimation is that it is possible to test individual statistical relationships for the impact of the financial meltdown that commenced in 2007. None of the world’s model builders appear to have anticipated the global financial meltdown and its effects on the economy. However, it is one thing to know that forecasting models have broken down in some vague general sense, and quite another to be able to say where and when the breakdowns occurred. The technique adopted was to include separate dummy variables for each quarter from 2008 Q1 onwards up to 2009 Q1, when the published data largely runs out. The data employed for estimation ran back to the 1970s or earlier and included several previous recessions.

The residuals about the fitted relationships were also inspected to see whether there was any sign of shocks before 2008 Q1. However, such shocks have to be larger than the normal ‘noise’ in the data to count as significant and most dummy variables were insignificant before 2008 Q4. The main place where it was possible to pick up significant effects before 2008 Q4 was the relationship for OECD industrial production, where output started to fall away from its fitted relationship in 2008 Q2 and Q3 before plummeting in 2008 Q4 and 2009 Q1. Otherwise, it was generally not possible to uncover any discernible impact before 2008 Q4. All the statistical relationships for the components of UK GDP showed significant negative shocks to quarterly growth in 2008 Q4 and 2009 Q1. These were of the order of 2¼% to 2½% in the case of real household consumption, 2¼% and 1¾% for the level of real inventories in 2008 Q1 and 2009 Q1, respectively, and around 4¼% in both quarters where UK private investment was concerned. British exports were almost 4% lower in 2009 Q1, than historic relationships would have suggested, but there was no evidence of any significant deviation where UK imports were concerned. These findings are consistent with the accepted view that the collapse of Lehman Brothers on
15th September 2008, led to a catastrophic loss of confidence and the spending cutbacks that turned a normal recession into a potential slump.

There was little indication that the relationship for OECD consumer prices had broken down, with a ½% undershoot in 2008 Q4 being offset by an equivalent rebound in 2009 Q1. This indicates that the ‘output-gap’ model of inflation remains valid and implies that global inflation may remain subdued for some years. However, the quarterly change in ‘double-core’ UK retail price inflation - which is closely related to the target CPI but available for longer - was higher in 2009 Q1 (by 1.4%) and in 2009 Q2 (1.9%) than the model predicted. This may be because the temporary VAT reduction has not been fully passed on – the effect of the weak pound was already allowed for in the equation concerned. UK real house prices were some 3¾% lower in the second half of last year than predicted, but appear to have returned to track this year. The world three-month interest rate was significantly higher in 2008 Q4 and 2009 Q1, than the model predicted. However, this was because the combination of low/negative inflation and an unprecedented OECD output gap meant that the historic relationship was trying to generate a negative interest rate. The current 0.5% world short rate possibly represents the effective lower limit for three-month interest rates everywhere. The unconventional measures resorted to by central banks seem to have successfully propped up the OECD broad money supply, which increased by some 2% more in 2008 Q4 and 1½% more in 2009 Q1 than might have been anticipated. The room for manoeuvre provided by Britain’s positive inflation has also allowed the MPC to keep Britain’s real interest rates lower in relation to overseas than would normally be expected.

The Bank of England has still not put a workable series for M4x into the public domain. This is surprising given the importance of M4x as the intermediate target for QE. However, a quasi-consistent unofficial series has been put together by subtracting the Bank’s implied figures for Other Intermediate Other Financial Corporation (OIOFC) deposits from their break adjusted M4 series. This has been used to re-estimate the BEF model, where broad money has a pervasive influence, in place of the ‘old’ M4. A demand-for-money relationship was also estimated for price-deflated M4x over 1972 Q1 to 2009 Q1. This statistical equation explained 83% of the quarterly changes in real M4x and had a standard error of 0.72%. The steady state of the dynamic ‘error-correction’ equation concerned has the properties that the logarithm of price-deflated M4x equals a constant plus the logarithm of household consumption minus 0.063 times the three-month inter-bank rate minus 0.072 times the difference between the twenty-year gilt yield and inter-bank rate. The M4x equation also included short-term effects from changes in the logarithmic price index. Most bank deposits now pay interest. Putting the two inter-bank-rate terms together implies that a 1 percentage point cut in the short rate reduces – not raises - the demand for money by 0.9%, other things being equal. However, the current 334 basis points excess of the gilt yield over inter-bank rate reduces real M4x by 24% compared to a situation where the two rates are equal. In this demand-for-money context, QE looks like an attempt to offset the indirect negative effect of the Budget deficit on M4x arising from the need to fund the fiscal deficit. This suggests that M4x growth may not recover until public borrowing is reined in, unless the Bank is prepared to acquiesce in crude inflationary finance.

Comment by Peter Warburton
(Economic Perspectives Ltd)
Vote: Hold
Bias: To increase Bank Rate towards 2% before the year end

The Bank of England’s Asset Purchase Programme (APP) has made a decisive contribution to the stabilisation of national income and spending since its inception in early March 2009. While there are well-founded reasons to believe that nominal GDP growth will resume during the July-September quarter, uncertainties will persist for a few more months. Hence, the extension of the policy on 6th August by £50bn to £175bn should be viewed as a sensible precaution. Further extensions seem likely to be requested and granted.

The key accomplishments of the quantitative easing (QE) programme, to date, are: the relief of pressure on the sterling capital markets, allowing non-financial corporations to issue debt and shares on more favourable terms; the mitigation of the impact of the government’s fiscal deficit on medium to long-term government bond yields; the positive public sector contribution to the growth of the broad money supply and the replenishment of commercial banks’ balance sheet liquidity. The net repayment of non-financial corporate sector bank loans in the April-June quarter (£14.7bn) reflects numerous factors and does not constitute an outright failure of the QE policy. One use of bank facilities is to finance inventory and capital expenditure and the severe economies made by the corporate sector have naturally lowered their demand for bank finance. Wholesalers and retailers were responsible for £6.3bn of the net repayments and manufacturers for £4.5bn.

Other Financial Corporations (OFCs) continue to place large demands on the UK banking system, raising lending by £11.3bn and deposits by £16.5bn in the June quarter. The normalisation of the mortgage sector is being hindered by the departure of foreign lenders and the tight restrictions imposed on banks partly or wholly in state ownership. However, mortgage lending is regaining momentum. Meanwhile, broad money supply growth has remained positive throughout the credit crisis, although the growth rates of money holdings of households and firms remains unusually low. Even so, it is important to bear in mind that this deceleration is due in part to the ‘interest-credited’ component of deposits, which is negligible at current interest rates. The headline growth of 1% in July M4, not yet allocated by sector, is the latest encouragement. More generally, the removal of financing constraints on the corporate sector at a time of massive primary gilt issuance has contributed to a much more positive tone in financial markets, evidenced by the spirited rally in UK equity prices.

UK consumer prices continue to defy predictions of weakness. The headline CPI inflation rate held steady at 1.8% in July and the core CPI rate rose from 1.6% to 1.8%. Despite a favourable comparison for food prices, private sector prices, excluding food and light, fully compensated. The decomposition of retail price inflation reveals a jump from 1.7% in June to almost 2.4% in July. This is the fastest rate of increase since April 1998. Household goods price inflation jumped back from 2.1% to 3.6%, and motoring expenditure recovered from 1% in June to hit 3.2% in July. Leisure goods deflation dropped to 1% from 2%. The overall picture confirms the stickiness of retail prices and casts considerable doubt on the ability of high unemployment and low capacity utilisation to moderate inflation. As the extraordinary price movements of last year wash out of the annual comparisons, another upward breach of the Bank of England’s 3% limit is to be expected next year. If the Bank of England’s MPC remains serious about hitting its inflation target, then the reign of ½% Bank Rate should be brought to an end within the next three months. By November, it should be clear that the deflationary emergency is over. A restoration of Bank Rate to around 2% should be accomplished soon afterwards but my vote is to hold interest rates at ½% for the coming month.

Comment by Trevor Williams
(Lloyds TSB Corporate Markets)
Vote: Hold
Bias: Hold rates at ½% and extend QE to a total of £250bn

The UK economy is showing strong signs of stabilising, but not yet of an overall recovery that is likely to be sustained at this time. Yes, the Purchasing Managers’ Indices (PMI’s) for manufacturing and services are now above the 50 level that indicates expansion, at 50.8 and 53.2, respectively, but the PMI for construction is well below 50 at just 47.0. Meanwhile, the volume of retail sales was up by 0.3% in July, to stand 3.3% higher than in the same period of 2008, while industrial production rose by 0.5% in June but remained 11.1% lower than in the year before. This means that the severity of the recession is clearly easing and, on the surface, the economic tide has turned. Not surprisingly, business and consumer confidence have perked up from their lows, with consumer confidence lagging the upturn. Growth in the third quarter may show the first positive number since 2008 Q1, but it is not yet clear that it will be sustainable.

The financial markets continue to stabilise. Equity prices are higher than a month ago, as measures of risk indicators in the equity and credit markets fell back and cash spreads have narrowed. Bond yields have come down further and the US dollar was modestly sold across most currencies pairs in the past month, suggesting a lessening of perceptions of risk about the world economy generally.

However, below the surface there are reasons for real concern, particularly if the ultra loose monetary position were to be reversed too soon. Chief amongst these concerns is that money supply growth is still weakening. Companies are reducing debt and households are borrowing less. This was shown up clearly in the M4 data for June and the provisional figures for July. Whilst the headline M4 figure in July showed a rise of 1% on the month, adjusted for other financial companies, (OFCs), there may in fact have been no growth in M4 itself - if the pattern of recent months persisted into July. Certainly, on the M4 lending side, there was a repayment of £1.1bn in July and there was a further fall in the annual rate of increase from 8.3% in June to 7.8% in July. It appears that companies that have been raising finance from equity or bond issuance have been using it to pay down their earlier bank loans. The 10.4% fall in business investment in the second quarter, which was down 18.4% on the year, is a sign that firms are still savagely cutting investment as it recorded its steepest fall since records began some forty-three years ago.

The second ONS estimate of 2009 Q2 GDP growth – which showed the detail of the spending components - confirmed a sharp fall in investment spending (down 4.5%), consumer spending (down 0.7%), and stocks (down £4.5bn). These falls were only partly offset by a rise of 0.8% in government spending and a positive impact from net trade of 0.2%, as imports fell more than exports. There was little in the data for private sector final demand (consumer spending and business investment) to suggest that economic growth was about to make a sustained comeback in the second half of 2009, despite the likelihood of a temporary boost from restocking after the savage destocking of recent quarters.

Bearing in mind that VAT has to be raised back to 17½% in January 2010, that tax rises are set to come into force in April and that the boost to real household incomes this year from falling commodity prices will not help real incomes in 2010 at a time that unemployment is set to rise further and government spending is set to slow markedly, monetary policy will likely remain loose for some time to act as an offset to some of these negative forces. The good news is that a very large negative output gap means that inflation is not a concern in the near term and so further QE can be adopted if necessary and Bank Rate can stay at its current ultra low level well into 2010 or beyond.

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 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: Roger Bootle (Deloitte and Capital Economics Ltd), Tim Congdon (International Monetary Research Ltd.), John Greenwood (Invesco Asset Management), Ruth Lea (Arbuthnot Banking Group), Andrew Lilico (Europe Economics), Patrick Minford (Cardiff Business School, Cardiff University), Gordon Pepper (Lombard Street Research and Cass Business School), Peter Spencer (University of York), Peter Warburton (Economic Perspectives Ltd), Mike Wickens (University of York and Cardiff Business School) 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 nine votes are cast.