Outlook: Down. No, up. Er, hang on...

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The Independent Online
When Gordon Brown announced just over a year ago that he was giving the Bank of England the independence to set interest rates, the common reaction was that this would make for tougher monetary policy. This certainly seems to have been the Chancellor's intention: it is pretty clear that he would have liked higher interest rates at an earlier stage, rather than having the policy debate drag on for so long. Instead, we have the fascinating new sport of MPC watching. A collective of economists and central bankers has turned out to be a more complex organism than everybody assumed. News that one of them actually voted for a decrease in rates only a month before rates were raised has confused the picture yet further.

One of the MPC's chief characteristics is that the pointy-heads on the committee - as the City has dismissively labelled the former academics - seem to value consistency in their analysis over consistency in their votes. This ought to have been predictable, but nobody foresaw it. As a result, when the evidence on the balance of the economy shifts from month to month, these people see nothing wrong with shifting their votes accordingly.

One member, Mervyn King, likes to say monetary policy should be completely boring and predictable thanks to the transparency of the process. On his terms, it probably is predictable - you just have to look at the data the way he and his colleagues do.

This is what distinguishes them from the pragmatic, wait and see group of bankers, Eddie George, David Clementi and Ian Plenderleith, who value the consistency of policy more highly. As one senior City figure put it yesterday: "Eddie has no control over the MPC. He's got his poodles but the rest are greyhounds sprinting away into the distance."

Does this mean the current arrangements are becoming unworkable? Not necessarily. After all, nobody thinks interest rates are wildly wrong. The Bank will probably have to rethink its policy of delaying publication of the minutes for six weeks, and might have to retreat from giving details of who voted which way. Perhaps it should adopt the Fed's approach of setting out the policy arguments in the minutes without personalising them. This would have less entertainment value than the present arrangements, but it might lead to a greater cohesion in decision making.

But the more serious question posed by yesterday's minutes is not what happened six weeks ago, but whether the Governor was on the winning or losing side when the decision was taken to raise rates last week. If the latter, it certainly does harm the MPC's credibility, for it means Mr George is in charge of carrying out a policy he does not agree with. This really would be a nasty surprise.