Everything about The Monetary Policy Committee totally explained
The
Monetary Policy Committee (MPC) is a committee of the
Bank of England, which meets every month to decide the official
interest rate in the
United Kingdom. It comprises:
Each member has one vote of equal weight. The Governor chairs the meeting and is the last to cast his vote, which effectively acts as a casting vote in event of a tie. Representatives from the
Treasury can attend the meeting, but only as non-voting observers.
Meetings are held on a Wednesday and Thursday, typically following the first Monday of each month but this is sometimes deviated from in order to interact with the quarterly inflation report process and to take into account other major commitments or to occur when there are relatively less data announcements. The interest rate decisions are announced at noon immediately following the Thursday meeting. Minutes of each meeting, which explain the reasons for the decision and list the votes of each member, are published on the Bank's website after a two-week delay.
In each meeting, the committee studies data relating to the
UK economy, as well as the worldwide economy, presented by the Bank's economists and regional representatives. Decisions are made with a primary aim of
price stability, defined by the government's
inflation target, set each year in the
Budget (since January
2004 the target has been 2% on the
Consumer Price Index). The secondary aim of the committee is to support the government's economic policies, and targets for growth and employment.
Under the
Bank of England Act 1998 the Bank's
Governor must write an open
letter of explanation to the Chancellor if inflation exceeds the target by more than one percentage point in either direction. On
April 16,
2007,
Mervyn King, wrote
the first such open letter
in the life of the MPC to
Gordon Brown, explaining why the inflation reached 3.1 %, one point beyond the target 2 %.
(BBC News)
Traditionally, it was the Treasury that set interest rates. On
May 6,
1997, the Bank was granted operational responsibility to set interest rates by
Gordon Brown, who was at that time the
Chancellor of the Exchequer, and the guidelines for this were formally laid out in the
Bank of England Act 1998. The government reserves the right to instruct the Bank on what rate to set in times of emergency.
Membership
To date, 19 men and 4 women have served on the MPC. They are:
Sir Edward George (June 1997 – June 2003)
Howard Davies (June – July 1997)
Mervyn King (June 1997 – 30 June 2008)
Willem Buiter (June 1997 – May 2000)
Charles Goodhart (June 1997 – May 2000)
Ian Plenderleith (June 1997 – May 2002)
David Clementi (September 1997 – August 2002)
DeAnne Julius (September 1997 – May 2001)
Sir Alan Budd (December 1997 – May 1999)
Sir John Vickers (June 1998 – September 2000)
Sushil Wadhwani (June 1999 – May 2002)
Christopher Allsopp (June 2000 – May 2003)
Stephen Nickell (June 2000 – 31 May 2006)
Charles Bean (October 2000 – 31 May 2010)
Kate Barker (June 2001 – 31 May 2010)
Paul Tucker (June 2002 – 31 May 2008)
Marian Bell (June 2002 – June 2005)
Sir Andrew Large (September 2002 – January 2006)
Richard Lambert (June 2003 – March 2006)
Rachel Lomax (1 July 2003 – 30 June 2008)
David Walton (1 July 2005 – 21 June 2006)
Sir John Gieve (16 January 2006 – 15 January 2011)
David Blanchflower (1 June 2006 – 31 May 2009)
Tim Besley (1 September 2006 – 31 August 2009)
Andrew Sentance (1 October 2006 – 30 September 2009)
Bold names indicate current membership of the committee. The dates listed show when their current terms of appointment are due to end.
Mervyn King, the Bank of England’s current Governor, is the only MPC member to have taken part in every meeting since 1997. Kate Barker is the only external member to date to have been appointed for three terms.
Further Information
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