Outlook: Stop yapping at the MPC

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The Independent Online
BARELY A day passes without another call for an injection of "realism" into the Monetary Policy Committee (which is shorthand for someone who will vote for a cut in interest rates).But much of the current debate misses the point. It does not matter whether MPC members are dyed-in-the- wool industrialists or ivory tower academics since the key to their decisions is the remit set by the Chancellor.

If everyone were clear about the MPC's objectives, then the debate would be less about whether the committee had the requisite quota of private sector experience, and more about whether it was ensuring targets were met.

At the moment, the MPC is charged first and foremost with maintaining price stability - meeting an underlying inflation target of 2.5 per cent. The MPC is also charged with supporting the government's wider economic objectives of growth and employment, as long as the over-riding goal of price stability is not jeopardised. So the message seems to be clear. The MPC's job is to get inflation down, and if manufacturing jobs are lost as an unavoidable consequence, so be it. As long as all the members of the MPC are committed to meeting these objectives, the outcome of the monthly interest-rate meetings should not be affected by the number of industrial economists on the committee.

So those clamouring for more private sector appointmentrts are barking up the wrong tree. They should be lobbying the Chancellor for a new set of objectives but since stability of monetary policy is a cornerstone of Mr Brown's strategy, they might as well stop yapping.

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