The Monetary Policy Committee denied there was any ‘group think’ or a ‘cluster pattern’ in how the members voted on interest rates.
Asked by Select Committee member and Liberal Democrat MP Bobby Dean why specific members seemed to consistently vote the same way – Catherine Mann and Huw Pill; and Andrew Bailey and Sarah Breedon – the BoE governor Andrew Bailey played down claims of a serious ‘divide in the committee’.
Mann agreed and added that each member took their role very seriously but sometimes interpreted and weighted data differently. “Different people weigh the variables in different ways.”
Last month, the Bank’s rate-setting Monetary Policy Committee voted in a 5-2-2 split to cut rates, with Dr Swati Dhingra and Alan Taylor pressing for a larger 0.5% reduction, while Catherine L Mann and Huw Pill were happy with the status quo.
Five members Bailey, Breeden, Megan Greene, Clare Lombardelli and Dave Ramsden voted for the 0.25% cut.
Dr Dhingra explained to the committee her reasons for being more aggressive in calling for 0.5% cut in June. She said that consumption and investment had been weak and the global situation had resulted in forecasts being revised downwards because the trade policy atmosphere looked very strained.
“Alongside these two factors and the general view that we don’t need to weigh down on living standards as much as we have had to, to get price stability back on target – that was the reason I moved towards a larger reduction in bank rate this time.”
Mann then explained to the committee her decision to advocate for a rate hold. She said that in February she had voted for a 50bps but from February to May the labour market had not loosened as much as she had expected and consumption was no weaker than she had thought.
More importantly, Mann stressed that inflation, though decelerating, was not decelerating consistent with achieving the 2% target in the medium term. The fact that financial markets had eased quite dramatically was also a contributory factor behind her ‘hold’ vote.
Bailey, Dhingra, Breedon and Mann all agreed that the ‘glide path’ on inflation was downward but as Mann stressed, the volatile environment meant there were concerns regarding inflation pressures and this meant timeframes on hitting inflation targets remained uncertain.
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