Outlook: Monetary soap
Thursday 18 November 1999
THE MONETARY Policy Committee's capacity for entertainment value is definitely on the increase, although it still falls short of the high comedy of the Ken and Eddie show it replaced. Like any good sit-com sequel it has retained, in the commanding figure of the Governor, one of the principal characters. Now further dramatic potential is emerging in the shape of the increasingly forceful characters of the other eight members of the committee.
The latest episode, following on from the big row over research facilities earlier this month, was a corker. On the face of it yesterday's minutes showed an eight-one split. Only DeAnne Julius voted against the quarter- point increase in interest rates.
Those other eight votes, however, disguised a mass of seething disagreement. One member, presumably Willem Buiter, suggested the increase should be less than a quarter point. At least one, probably including Mervyn King, wanted a half-point rise instead of a quarter. Confused? You will be after this latest episode of "Trouble on the MPC". More importantly, what on earth does this difference of opinion imply for forthcoming interest rate decisions? It's a real cliffhanger.
Frivolity aside, it is obviously a huge improvement to have a more transparent debate which sheds light on genuine and inevitable differences of opinion. It was the lack of transparency that really made the Ken and Eddie show a farce, because it was an open secret that the published minutes were a fig-leaf for a decision made by the Chancellor before the meeting even started.
However, there is a sense in which yesterday's minutes almost let too much hang out. Seemingly everyone gets a paragraph to set out his or her view. While airing the broad debate in public is certainly valuable, it also gives the impression that the MPC's members are succumbing to the temptation to try and fine-tune the economy, as if a 0.125 per cent variation in interest rates will make any significant difference to the economy two years hence.
The squabbling cast of the MPC must keep the broader picture in mind - that theirs is an imprecise science in which the aim must be to avoid big mistakes rather than get small details right. So far, luckily, they've achieved it, but the lack of coherent consensus suggests it may not always be thus.
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