City & Business: Eddie needs a result from his first test

The inaugural meeting of the Bank of England's new monetary policy committee goes into session on Thursday. The meeting will conclude on Friday morning, and at midday the committee will announce whether interest rates are to change or not. The betting in the market is that they will not, but that view is based more on practicalities than on fundamental economics.

The MPC, you will recall, is the mechanism by which the Bank of England will set interest rates as part of the operational independence it was granted by the Government last month. The problem is that the nine-man committee so far only has three-and-a-half members. The Governor, Eddie George, and two key Bank lieutenants are in place, but deputy governor Howard Davies will be leaving the Bank shortly to head a beefed-up Securities and Investments Board. The Government is expected to name the four new outside members of the committee this week, which will still leave it light of a second deputy governor and a replacement for Mr Davies.

It is unlikely that the four new appointees will be in place in time for Thursday's MPC meeting, but that will not stop it going ahead nor will it interfere with a robust debate of interest-rate policy. Those who believe the committee will be prone to inertia in its formative weeks are misguided. As far as the Bank is concerned, this is an official meeting and if the committee accepts that a quarter-point rate rise is required then one will be sanctioned.

The Bank has already hinted that a small rise is needed if the Government's 2.5 per cent target inflation is to be met. However, although the meeting is likely to consist of only four Bank executives and a Treasury representative this does not mean the committee will just rubber stamp the stated Bank view and order a rate rise. It is quite apparent that Mr George intends to take his responsibility as chairman seriously. He is not going to squander the opportunity the Bank has been given with an ill-considered first decision. The debate will be rigorous and comprehensive as the minutes will show when they are published six weeks later. Whatever is decided will stand the test of the most vigorous analysis.

What will come through most clearly from the minutes of this week's meeting and those in the months ahead is the importance of Mr George's role as chairman of the MPC. My guess is that he will try and avoid a monthly vote and instead lead the meetings towards consensus. A consensus decision will always carry much more authority with the markets than one based on a split vote. But that consenus will only be achieved by an authoritative and respected chairman. Mr George fits the bill perfectly, and this represents another powerful argument for why he must be reappointed as Governor next year.

For while Chancellor Gordon Brown rightly won plaudits for the bold move to give the Bank responsibility for setting interest rates, the real test is how the MPC works in practice. Sustained credibility for Mr Brown will come from the sustained credibility of the MPC. In this respect, Mr George is not just an asset but an ally.

EMU's credibility gap

IF TODAY'S final round of the French election delivers a socialist government, it will erode yet further the credibility of the increasingly incredible European Monetary Union. Like their right-wing opponents, the Socialists will sign up for the first wave of EMU, scheduled for 1999. However, their commitment to meeting the convergence criteria is virtually non-existent - hardly surprising after Germany's blatant attempt at creative accounting.

Given that France and Germany were supposed to be the anchors of a single currency, their desperate manoeuvrings to meet the Maastricht criteria look all the more pathetic. The time has come to put the wretched project out of its misery and pronounce a delay - an idea that Bundesbank president Hans Tietmeyer appears to endorse.

To carry on this pretence that EMU is some panacea to European economic mismanagement is a quite ludicrous charade. A weak EMU is a dangerous EMU, which if allowed to proceed with the fantasy finances of the member countries will create long-term economic problems that will take years to unravel.

One big problem with the single currency as currently proposed is that membership relies too much on the letter rather than the spirit of the Maastricht convergence criteria. To have any sustainable future, a single currency must be based on member countries who have a clear long-term commitment to economic prudence rather than clever one-off compliance with the entry rules.

In short, it has to be rethought and that will require a delay. The sooner this is accepted, the sooner EMU can be reconstructed in a fashion that will allow it to deliver the promised economic stability.

Rough ride for Warner

OUR front-page story that Warner Brothers and United News and Media have been forced to pull out of their proposed pounds 225m Movie World theme park in north-west London is little short of tragic. The opportunity to create over 4,000 jobs and generate significant economic wealth has been lost almost by accident.

Such a valuable prize would not have been allowed to slip away if the park was being built in France. I remember a few years ago noting the contrast between the French and British attitudes to a planned theme park that Rank and Universal Studios had wanted to build. The French were offering to build a railway station at the proposed site on their side of the Channel and had an array of subsidies and tax breaks available. The rival British site could only offer a lengthy public inquiry. Rank wanted to build the park in Britain but the different attitudes made it hard to exploit their patriotism. The recession killed the project, but the point is still well made.

Thankfully Warner and UNM and now looking for another site. When they find it, they must not be subjected to the same frustration.

Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Louis van Gaal would have been impressed with Darren Fletcher’s performance against LA Galaxy during Manchester United’s 7-0 victory
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
The new dawn heralded by George Osborne has yet to rise
voicesJames Moore: As the Tories rub their hands together, the average voter will be asking why they're not getting a piece of the action
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Rhys Williams
commonwealth games
Life and Style
People may feel that they're procrastinating by watching TV in the evening
Arts and Entertainment
Southern charm: Nicolas Cage and Tye Sheridan in ‘Joe’
filmReview: Actor delivers astonishing performance in low budget drama
Isis fighters travel in a vehicle as they take part in a military parade along the streets of Syria's northern Raqqa province
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
fashionLatex dresses hit the catwalk to raise awareness for HIV and Aids
Life and Style
The veteran poverty campaigner Sir Bob Geldof issues a stark challenge to emerging economies at the Melbourne HIV/Aids conference
Arts and Entertainment
Benedict Cumberbatch and John Malkovich talk Penguins of Madagascar at Comic-Con
comic-con 2014Cumberbatch fans banned from asking about Sherlock at Comic-Con
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
filmGuardians Of The Galaxy should have taken itself a bit more seriously, writes Geoffrey Macnab
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Graduate Recruitment Resourcers - Banking Technologies

£18000 - £25000 per annum + OTE £40,000: SThree: Huxley Associates are looking...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform