Interest rates panel hit by election rules
THE Bank of England’s rate-setting team could be down to just seven members for the first time in nearly 11 years as election “purdah” rules will delay appointments until at least next month, it has emerged.
The Bank’s Monetary Policy Committee is already reduced to just eight members from the usual nine, after deputy governor Charlotte Hogg was forced to resign in March for failing to declare her brother works for Barclays.
External MPC member Kristin Forbes is also due to step down at the end of June, while chief economist Andrew Haldane’s term ends at the end of May.
The Treasury is leading the recruitment but it has put the process on hold as it is unable to make appointments due to the so-called purdah rules on Government announcements during the run-up to the General Election.
While it is expected that Mr Haldane will continue in his post until his reappointment can be confirmed, the delay to replacements for Ms Hogg and Ms Forbes could mean the smallest rates contingent since 2006.
The committee has not been down to seven members since July and August 2006 after the unexpected loss of David Walton, who last voted in June 2006 and died later that month.
The Bank will be hoping it can have the new members in place for the rates decision on August 3, when the Bank will also release its quarterly inflation report.
The Old Lady of Threadneedle Street was left red-faced after the resignation of Ms Hogg just two weeks after she took up the post. A scathing verdict in a report by MPs on the Treasury Select Committee found her “professional competence falls short” of the standards required for the role after the conflict of interest breach.
The omission caused her to fall foul of the code of conduct rules she helped to draw up at the Bank.
Ms Hogg acted as deputy governor on top of her role as chief operating officer but it is understood the role will now be split. Economists will also be watching closely for news of the replacement for Ms Forbes, who has been the sole “hawk” voting for a rate rise for the past two decisions.
Ms Forbes has called for a rise from 0.25 per cent to 0.5 per cent amid fears over surging inflation but a recent slowdown in growth is unlikely to mean the other members agreeing with her.
Experts believe rates will remain on hold until at least 2019, with the latest official estimate showing growth was even slower than first thought at the start of 2017, at 0.2 per cent.
Investec economist Philip Shaw said while the departure of Ms Forbes will leave the MPC without a hawk, it is unlikely to change the outlook for rates.
He said: “To our minds, the direction of the economy is pretty clear at the moment.
“I’m not sure whether the decisionmaking process will be sensitive to specifics of one or two new members.”