Sunday, November 01, 2009
Hold Bank Rate and persist with Quantitative Easing (QE) say IEA’s Shadow MPC
Posted by David Smith at 08:59 AM
Category: Independently-submitted research

Following its latest quarterly gathering on 20th October, the Shadow Monetary Policy Committee (SMPC) voted by eight votes to one to leave Bank Rate at ½% when the Bank of England’s rate setters next meet on 5th November. The dissenting vote was to raise Bank Rate immediately to 1%, because of concern that inflationary pressures were building up in the private sector of the economy.

When asked to look further ahead, most SMPC members had a neutral bias where Bank Rate was concerned. This was because of the uncertainties involved, which suggested that ‘wait and see’ was the safest option. In contrast, the dissenting SMPC member thought that Bank Rate would need to be raised to 2% fairly promptly.

There was a widespread view on the SMPC that quantitative easing (QE) needed to be extended for some months beyond November, when new Inflation Report forecasts will be available and the present schedule expires. However, there was disagreement about whether QE should be persisted with in the medium term. Some members were keen to stick with QE until the underlying growth of core broad money – the so-called M4X – was rapid enough to ensure recovery. However, others thought that QE should be terminated after one final tranche, because of the inflation risks involved if it was continued for too long.

Despite the earlier date of the SMPC gathering, the final poll was not ‘frozen’ until Tuesday 27th October. This meant that most SMPC members knew of the disappointing UK growth figures released on 23rd October and some referred to them in the final edited submissions. Informal soundings revealed that several SMPC members thought that the official figures were unreliable and likely to be revised. One member was concerned that regulatory proposals to increase bank capital and liquidity would cause commercial bankers to cut back their balance sheets in anticipation, leading to a renewed collapse in money and credit and a second leg to the downturn.

Minutes of the Meeting of 20th October 2009
Attendance: Tim Congdon, Kent Matthews (Secretary), Gordon Pepper, David Brian Smith (Chair), Trevor Williams, External observers: David Henry Smith (Sunday Times), Hiroshi Oka (Minister for Economic Affairs, Embassy of Japan), and Hajime Yoshimoto (Senior Economic Analyst, Embassy of Japan)

Apologies: John Greenwood, Ruth Lea, Andrew Lilico, Patrick Minford, Peter Spencer, Peter Warburton, Mike Wickens.

Chairman’s comments
David B Smith began the meeting by suggesting to the Committee that, after more than twelve years with a remarkably stable membership, they needed to consider the recruitment of some younger people under the age of thirty or so. This was to ensure the continuity and sustainability of the Committee in the medium term. He then called upon Tim Congdon to provide his analysis of the global and domestic monetary situation.

The Monetary Situation
The International Situation – Plummeting Global Activity

Tim Congdon referred to his prepared slides which can be obtained on request from timcongdon@btinternet.com. He began by outlining the disequilibrium money interpretation of recent events and highlighting the implications for broad money demand. The view that banks were undercapitalised and suggestions of increasing capital-asset ratios have had the perverse effect of reducing loan growth and broad money growth. Current policy was being driven by two erroneous models of the monetary process. The first of these is the ‘Creditist’ theory based on the work of Bernanke and Blinder. The disastrous policy of recapitalisation was a direct response to the ‘Creditist’ theory. The second of these is the focus on money base which has led to the Fed not monitoring the broad money aggregates. Bernanke had scrapped the M3 figures in 2006 on the grounds that the Fed no longer monitored them. The trouble is that the US banking system has been shrinking its asset base at such a rate that M2 and M3 deposits have been falling. The Federal Reserve has conducted credit easing policies and purchased assets from non-banks which in effect have subsequently raised M2 and base money. Gordon Pepper questioned the US M3 figures shown by Tim Congdon in his presentation. His view was that the reality was even worse than that shown on the charts because the figures were not adjusted for the shadow banking system.

Within the EU, the ECB has certainly helped the banks but some banks were heavily reliant on the interbank market, in Tim Congdon’s view. Euro-zone M3 growth is hampered by the policy problem of which specific EU government’s debt the ECB should buy. In Japan QE has been conducted by buying bank assets and not by purchases from non-banks. This has pushed up monetary base and M1 but not broad money. China has seen a tremendous upward blip in money growth which has stimulated an asset price bubble. India has money growth of 15% to 20% and Brazil is in relatively good shape. In the Western economies, the shrinking banking sector has seen declining money growth.

The UK Economy – better outlook for 2010
Turning to the UK, Tim Congdon said that in 2006 M4 was rising in the order of 12% a year. There were symptoms of an asset price bubble in the making. Inflation would have increased and was above target in March 2007. But by the autumn of 2007, interbank markets had seized up. Company sector money holdings have been highly volatile. Money holdings in the household sector are always in equilibrium and household money growth has been falling. The shrinking assets of the banking sector would have been converted into falling bank deposits if it were not for the contribution of the public sector.

Summary of Presentation
Tim Congdon said that as a result of the QE measures, the stock market is buoyant, house prices are beginning to recover and in particular the commercial property market has shown signs of improvement. He said that he was relaxed about the outlook for the UK in 2010. Unemployment was no longer rising. The only worrying factor for the UK is the world outlook. He said that the Bank of England should engage in a policy of selling short term bills for cash allowing the balance sheet of commercial banks to return to a more normal structure. The UK economy will still be below trend in 2010 and it is therefore premature to talk about exit strategies.

Discussion
Quantitative Easing (QE) is the correct policy

David B Smith thanked Tim Congdon for his presentation. In order to open the debate, he said that he had largely re-estimated both the international and UK sectors of his macroeconomic forecasting model since the summer, in large part because of extensive changes to the official statistics. However, by fitting dummy variables to each quarter from 2008 Q1 to 2009 Q1 or Q2, when the data expired he had been able to quantify to some extent when, and in which relationships, there had been breakdowns since the financial crisis got under way. In general, he had found little evidence of a breakdown in the price equations, and believed that the recent falls in OECD consumer prices were consistent with historic experience and the unprecedented size of the OECD output gap. However, there were large and highly significant negative departures from historic relationships in OECD output and UK real expenditure equations in 2008 Q4 and 2009 Q1. There was little evidence of a breakdown before then, however. The main exception was in the case of OECD industrial production where output in the second and third quarters of 2008 was somewhat weaker than expected. He suggested that the statistical evidence was consistent with the widespread view that it was the panic caused by the collapse of Lehman Brothers in September 2008 that had transformed a mild growth recession into a potential global slump. The extent of the loss of international output involved suggested that the decision to let Lehman Brothers collapse was a very expensive mistake from the viewpoint of the world as a whole, if not necessarily that of the US taxpayer.

David B Smith added that his UK model contained widespread feedbacks from broad money to a range of real and financial variables. He had replaced the old M4 broad money series with a break-adjusted series for M4X, which excludes deposits held by other financial corporations, in his re-estimation. The fact that the model seemed to track better with M4X than with the old headline M4, suggested that the Bank of England were justified in concentrating on the narrower definition. Finally, he advanced the hypothesis that the current slowdown might not just be the result of the financial meltdown but could also reflect a supply-withdrawal caused by the sharp increase in the government spending burdens in the US and Britain since 1997. If one applied the usual rule of thumb from panel data studies, that each 1% increase in the government expenditure ratio slowed the growth rate of GDP per capita by 0.125 percentage points, then the increased spending burden in the UK between 1997 and 2010 (OECD forecasts) would have slowed the growth rate in Britain by 1½ percentage points and that in the US by ¾’s of a percentage point. Such a growth slowdown would be expected to provoke a financial crash because the associated reduction in the net present value of future income streams would lead to a collapse in equity valuations and property prices. In other words, he was hypothesising that the global financial crash was partly a symptom of the slower potential growth rate caused by increased government spending burdens, particularly in the US and Britain since the mid 1990’s, as well as a cause of the downturn. He then threw the meeting open to discussion.

Tim Congdon said that policy was in a terrible muddle with QE being the right approach but raising capital having the effect of reducing lending. If not for the existing QE measures the overall effect would have been much worse. Trevor Williams said that policy was meant to be counter cyclical but raising the issue of capital adequacy has made it pro-cyclical. He added that there is a limit to which the banks will be able to take government debt as a substitute for the private sector. The government debt to GDP ratio is already high and is expected to rise even higher.

Gordon Pepper said the missing part of Tim Congdon’s analysis was the impact on the money supply of non-resident and foreign currency transactions. Leaving that aside, he was concerned by the recent collapse in the rate of growth of M3 in the US. Before drawing a conclusion it was important to check for distortions and special factors. The crucial factor was whether the supply of money was greater or less than the demand for money. Adjustment for the shadow banking system indicated that supply was probably even lower than indicated. A fall in the stock of unused credit facilities suggested that the demand for money might have risen because people would want to hold more money when credit was not freely available. In other words the squeeze was probably even tighter than Tim’s presentation suggested. Tim’s graph for the growth of broad money in the Euro-zone also showed a sharp fall, which was worrying. In the other direction Chinese monetary growth was very buoyant. Monetary growth in the UK was about right. QE was working. Sterling had fallen, which would stimulate exports and encourage import substitution. Asset prices had risen. Commercial banks had been able to raise new capital and industrial companies had been able to strengthen their balance sheets by issuing bonds to repay bank loans without the money stock falling. Further, there were early tentative signs that the money created by QE was starting to filter through to the household sector.

Kent Matthews said that the theoretical argument for quantitative easing is that it is supposed to have a powerful direct effect on spending via the real balance effect. In current circumstances, ‘the real balance effect’ may be weak and QE would work through the ‘Keynes effect’. He said that he was mindful of Patinkin’s paper in the American Economic Review in 1948 where he showed that real balances increased by 19% in 1930-31 in the USA but consumer spending fell by 13%. Admittedly, Patinkin was using M1 as a measure of balances and he argued that what was needed was an active policy of monetisation and money financed deficits. Tim Congdon said that he had a lot of trouble with the suggestion that the real balance effect is weak. He said that the key to understanding this cycle - as others - is that agents have a stable demand function for real money balances (give or take) and that fluctuations in the growth of bank assets have caused them to have excess and deficient real money balances etc. QE has boosted nominal/real money (certainly relative to what would otherwise have occurred) and therefore eliminated – or had gone a long way towards eliminating - the squeeze on real money in late 2008 and early 2009, giving us the recovery.

Kent Matthews said that his take on the real balance effect is that it works as a direct expenditure mechanism in the sense of Patinkin (1966), whereas the Keynes effect works by altering the cost of capital. Given the state of uncertainty regarding future income growth and private sector wealth, any unexpected money balances that come to the private sector, particularly households, will be used for repaying debt and precautionary saving. He agreed that QE has generated an increase in money but it was still insufficient to generate an increase in domestic demand. QE had generated a boom in the stock market and the corporate bond market and made it easier for companies to raise capital at low cost. So far, this has not generated investment spending but it is likely that this will come first, before households start to spend again. What is needed is a lot more QE but, even with a lot more QE, the impetus for an increase in domestic demand will come through the ‘Keynes effect’ first and then followed by the real balance effect.

Tim Congdon said the Keynes effect is said to be distinct from the real balance effect, because the Keynes effect operates via ‘the rate of interest’ to investment. But what is this ‘rate of interest’? In Keynes it is clearly the long bond yield. So is ’money’ meant to be base or broad money? Keynes is ambiguous, although on the whole he was a broad money man. If money increases, long bond yields fall and the economy recovers in this Keynesian approach. In reality, there were many assets other than long bonds in Tim Congdon’s view. There were, for example, equities and real estate. His belief was that - if broad money rises - all asset yields (and not just ‘the rate of interest’) fall, with positive effects on both investment and consumption. However, it was obvious that in Tim Congdon’s approach - where assets are not restricted to long bonds - the distinction between real balance effects and a Keynes effect disintegrates.

Votes
The Chairman then asked each member present to make a vote on the monetary policy response. In addition, since only five SMPC members had been present at the meeting there was a need for four votes in absentia. These were supplied by Roger Bootle, Andrew Lilico, Patrick Minford, and Peter Warburton.

Both the in absentia votes and the votes of those who were present at the
20th October SMPC gathering are listed in alphabetical order below. This is partly because the order in which votes were cast at the meeting simply reflected the arbitrary seating arrangements at the time. The Chairman traditionally votes last.

Comment by Roger Bootle
(Deloitte and Capital Economics)
Vote: Hold: more QE
Bias: Even more QE

In his written submission, Roger Bootle stated that the economy was recovering but that it was still fragile. There remained a serious risk of a slip back into recession in his view. The banks had a long way to go to rebuild their balance sheets and consequently remained reluctant to lend. Next year, there will probably be an intense fiscal tightening. In these circumstances, the Bank of England should extend QE. It should extend it by £50bn to £100bn now and be prepared to do more if necessary later. Roger Bootle believed that the Bank of England should also consider whether it was feasible to lower interest rates still further, perhaps combining this with a charge levied on commercial banks’ cash balances that were held at the central bank.

Comment by Tim Congdon
(International Monetary Research Ltd)
Vote: Keep rates on hold. QE to be sufficient to deliver M4X growth of 5%
Bias: Neutral

Tim Congdon told the SMPC meeting that QE will have to rise to £200bn but it will depend on how the market reacts and what happens to bank lending. It is premature to talk of exit strategies. He said that he was concerned about the sharp deceleration in broad money in the USA but that he was not hysterical.

Comment by Andrew Lilico
(Europe Economics)
Vote: Hold interest rates: extend QE by a further £50bn
Bias: Thereafter pause with QE

In his post-meeting submission, Andrew Lilico said that the economic situation was dire, and if anything expectations were deteriorating. The current GDP data marked this as possibly the worst recession in terms of GDP contraction since the 1920s, albeit subject to revision. The unprecedented contractions in output per worker in the first and second quarters of 2009 imply that unemployment would have to rise by nearly 7 percentage points to well over four million just in order to restore productivity to its end-2008 level.

He added that It will, presumably, be the case that deflation abates somewhat in the New Year, from its current rate of minus 1.4%, which represents the eighth straight month of deflation, as VAT rises back to 17.5%. But this would be only a temporary effect. A double dip in GDP growth, with probably two more quarters of contraction in the New Year, and unemployment rising rapidly throughout the year will both place considerable downward pressure on wages - which may yet experience outright falls - and the widespread prime defaulting that would imply. The UK banks were in a race against time. Foolish imprecations for banks to lend more and urging consumers to spend more were extremely unhelpful. UK consumers were not deleveraging remotely rapidly enough, in Andrew Lilico’s opinion. The enormous money printing exercise, interest rate cuts, currency devaluation, and fiscal stimulus had merely bought the economy time to deleverage - time that was not being well-spent yet. The moment of reckoning could come for many consumers in later 2012, and the government would have run out of ways to smooth the process.

For now, then, Andrew Lilico believed that QE should be further extended. But a critical juncture was being reached because quantitative easing could not continue indefinitely. And next year there would need to begin a massive fiscal contraction. Government spending would need to be cut by an order of £80bn over a three-year period and taxes to rise by perhaps £20bn. Past evidence suggests that the path of fiscal contraction was considerably eased if it was accompanied by monetary easing. Would it be enough if monetary policy was merely loose? Or would it need to be actively loosened? Could we afford to do all the QE possible before the process of fiscal contraction even began? Andrew Lilico concluded with the statement that he was becoming nervous, and was therefore inclined to recommend a pause to QE after the next three-month round.

Comment by Kent Matthews
(Cardiff Business School, Cardiff University)
Vote: Hold: increase QE
Bias: Neutral

Kent Matthews said that he would like to see QE being increased further and not just an increase in the flow through money financing the deficit but further monetisation of the debt. The current recession has the potential to go as deep as the recession of 1930-31 if QE is not expanded further.

Comment by Patrick Minford
(Cardiff Business School, Cardiff University)
Vote: Hold
Bias: Neutral: there is an equal chance that the recovery could strengthen or weaken more than expected

In his absentia vote, Patrick Minford stated that the measures to offset the credit crisis had been highly effective. They had consisted of four parts: sharp interest rate cuts, direct support for bank balance sheets, fiscal support (essentially credit provision directly by government to the private sector), and large-scale purchase of financial assets by central banks (QE). The latter assets had included mortgage packages and corporate bonds, as well as government bonds. It was true that these measures had not revived credit growth in most economies - this languished in the US, the UK and in the Euro-zone, according to Patrick Minford. But cash had become available again in large quantities and this had raised the prices of a wide range of assets, making it easier for firms to raise money by a variety of channels, especially equity and bond issue - both of the latter had increased sharply. In effect savings had bypassed the banks, which had been unwilling, unable, or simply not allowed by regulators to make loans easily available. Like floodwater, money had found ways to flow into the economy and stimulate spending.

Patrick Minford anticipated continued QE and fiscal deficits, until growth strengthened. He did not expect strong growth in 2010 for the simple reason that raw materials remained in short supply with oil prices already back up to $80 a barrel. What strong growth was possible in the world economy would be pre-empted by China, India and other emerging market economies. These countries’ growth would ‘crowd out’ in Milton Friedman’s phrase the growth in developed countries. Nor would the Euro-zone or Japan be exempt from this weakness. Their currencies had appreciated sharply against the dollar because policy in both areas had been less stimulatory than in the US.

Confident generalised world growth would not be possible again until the raw material shortage has been eased by technological advance in Patrick Minford’s opinion. While the cries of the global warming lobby and the Kyoto process appeared to have run well ahead of the empirical evidence on the effects of manmade CO2 generation, nevertheless they were pushing technology in the right general direction to enable renewed strong growth at some point in the future. The implication of this reentry process is that for now there was no reason to tighten monetary conditions, as we were still in the stage where inflation was well below target. Patrick Minford correspondingly preferred to leave interest rates unchanged and continue with QE; as the evidence from equity and corporate bonds markets was that the latter was having definite and beneficial effects, He would support the programme being added to as asset purchases used up the existing £175bn facility. He had no bias because he believed there was an equal chance that the recovery could strengthen or weaken more than expected.

Comment by Gordon Pepper
(Lombard Street Research and Cass Business School)
Vote: Hold: continue with QE
Bias: Neutral

Gordon Pepper agreed that QE is working. Quantitative easing should continue so as to deliver a 5% increase ± 2% in M4X or M4 holdings of households and OFCs. The assessment each month should be based on the latest information for broad money growth. He added that if the US broad money figures continued on their current downward path in the next three months his concern for the future of the global economy would rise to ‘alarm’.

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

David B Smith said that there seemed to be near-lunatic policy inconsistency between the employment of the controversial and potentially dangerous policy of QE to boost broad money and credit and the regulators’ desire to raise the capital and liquidity requirements of the commercial banks. This was because the latter would almost inevitably cause banks to both restrict the size of their total balance sheets and substitute government debt for private lending within their diminished total asset books. There was a parallel here with the argument in supply-side economics that the announcement - or even mere expectation - of future tax increases would cause a supply withdrawal well before the tax change was implemented. If he was the general manager of a clearing bank, he would already be giving instructions to reduce lending to the private sector so as not to be caught short of capital and/or liquidity when the new regulatory controls currently being discussed were imposed. He was also profoundly concerned that regulatory shocks imposed by international agreement would cause the entire global banking system to take a similar view, leading to a synchronised global downturn that would be similar to, but worse, than the US recession that followed President Roosevelt’s misguided decision to double the reserve asset requirements of US banks in 1936. (Editorial note: these concerns are set out more fully in David B Smith’s 12th October pamphlet from the London think tank Politeia, Crisis Management? How British Banks Should Face the Future www.politeia.co.uk). The solution to the ‘too-big-to-fail’ problem was to use existing anti-monopoly legislation to break up the big banks, or at least those dependent on state guarantees, not to pile new legislation on new legislation until the whole global and domestic credit creation processes ground to a halt.

In David B Smith’s view, banking regulation, QE and the setting of Bank Rate were all part of one monetary policy problem. He also thought that far too much attention had been paid to the question of QE, which is a useful policy tool but not a miracle worker, compared to the potential damage that could be done by misguided regulatory interventions. He could see no immediate case for a rate change in November but thought that some modest hikes would be appropriate before too long. This was as much for the signal that this would provide to the foreign exchange markets that the authorities were serious about inflation, as it was for any objective difference that it would make. He would also be prepared to extend QE if it looked as if the growth of M4X was too weak to support activity. However, his statistical research suggested that there could also be an attempted move out of money balances caused by the very low real rates of interest paid on bank deposits, in which case slow monetary growth would not be inconsistent with a recovery in effective demand. Ultimately, it was hard to see any strong recovery in the British economy without improved fiscal discipline. The fiscal policy stance in Germany over the past decade seemed to him to be far more intelligent than Britain’s. This probably explained why Germany was already emerging from recession and the UK was not.

Comment by Peter Warburton
(Economic Perspectives)
Vote: Increase Bank Rate to 1%
Bias: Extend QE, but increase Bank Rate to 2%

In his written submission, Peter Warburton stated that the release of the September data for the consumer and retail price indices confirmed that inflationary pressures are building rapidly within the private sector. While the headline annual CPI inflation rate fell back to 1.1% and headline RPI inflation remained negative, various exceptional factors were masking an underlying deterioration in the inflationary context. His calculation of the rate of private
sector inflation (excluding household fuel and light) has broken above 3%, its highest level since 1994. As the favourable base effects evaporated over the next six months, and other price increases took effect, headline RPI and CPI inflation rates were likely to soar well above 3% again.

The UK was experiencing more pronounced inflationary effects than elsewhere, in Peter Warburton’s opinion, due to the abruptness of the currency depreciation that had occurred last year. In the past few weeks, there had been a reminder of the vulnerability of sterling to further bouts of weakness. Since the credit crisis erupted over two years ago, global supply conditions had tightened very significantly, restricting the supply of very cheap goods from Asia. This was showing up in the reversal of longstanding deflationary trends in Asian export price indices. Moreover, the ability of foreign exporters to hold their sterling prices had been undermined by the crisis. Sizeable price increases were being routinely passed along to UK consumers.

The Bank of England’s MPC had some important decisions to make regarding its commitment to the CPI inflation target, according to Peter Warburton’s written submission. While a majority appeared to believe that the Bank could adopt a ‘wait-and-see’ attitude to the return of inflationary forces, this might prove extremely detrimental to the MPC’s credibility and to overseas perceptions of sterling assets. The time had arrived to address these concerns with a 50 basis point Bank Rate increase. Rate increases in Australia and Israel had been well received by financial markets; monetary authorities in other countries with independent currencies (e.g. Canada, Norway and Sweden) were clearly considering similar moves.

The weak provisional GDP data for the third quarter should not distract from the much greater issues at stake in Peter Warburton’s view. These figures might well be revised upwards, perhaps significantly, when more complete information becomes available. In any case, the slump in August industrial production was probably due to planned temporary shutdowns rather than an indication of renewed weakness. September data should help to clarify this matter. The primary effect of raising Bank Rate would be to limit profit-making opportunities by large banks. There should be only a negligible effect on the borrowing costs of banks’ individual and small business customers. Meanwhile, the expansionary thrust of UK policy could be maintained through the extension of the QE programme of asset purchases, which was holding down gilt-edged yields by approximately 50 basis points. The time to raise Bank Rate was now.

Comment by Trevor Williams
(Lloyds TSB Corporate Markets)
Vote: Hold: increase QE and purchase gilts from the non-bank sector.
Bias: To ease further

Trevor Williams said that QE had to increase but also needed to be broadened further with gilt and non-gilt paper purchases from the non-bank sector generally and not just from the financial institutions. Broad money growth needs to be around 8% to 10% per annum before economic recovery is assured. To get to that point, the MPC may have to take risks with inflation. And therefore the risk of overkill may be high, but there seems to be few realistic options but to pursue QE further to ensure that, once it is started, economic recovery is sustainable. It is good news that the signs are that QE appears to be working; the bad news is that those signs also suggest that once recovery is underway, it may have to be withdrawn as quickly as is feasible.

Policy response
1. Eight SMPC members voted that interest rates should stay on hold. However, one wanted an immediate increase in Bank Rate to 1%. Some two-thirds of the SMPC thought that QE had to be maintained in the immediate future.

2. Some SMPC members said that QE should be increased in the medium-term. However, others thought that further increases would either not be appropriate or should only be continued for a limited period. One member of the shadow committee wanted a further rise in Bank Rate to 2% to accompany any extension of QE.

3. Two members said that the extent of QE should be conditional on the growth of the M4X definition of broad money and/or the closely related concept of household and non-financial corporate money holdings.

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.