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--Five Things We Learnt From BOE Vliege at House of Commons TSC
By David Robinson
     LONDON (MNI) - Bank of England Monetary Policy Committee (MPC) Gertjan
Vlieghe gave evidence to the Treasury Select Committee Tuesday.
     Here are five things we learned:
     -Vlieghe believes that the MPC should publish its own expected path for
Bank Rate. The orthodoxy at the top of the Bank has been against this. Vlieghe
said that he had raised it internally but that there had been no show of hands
on it and he acknowledged some of his colleagues are opposed to it. "On balance,
I favour moving in the direction of being more explicit about the policy path
that is expected to return inflation sustainably to target. The advantages
outweigh the risks, in my judgement. I think such a change would represent a
further, modest, evolutionary improvement in communications," Vlieghe said in
his questionnaire.
     -On the monetary policy stance and outlook for growth and inflation Vlieghe
is in line with the majority. He said that he supported the central projection
in the May Inflation Report, for subdued growth and gentle return of inflation
back down to target. Asked why he had not supported a rate hike in May he said
that there was "a very low cost" to delaying a hike in order to see how the
economy unfolded.
     -The upper part Vlieghe's forecast range for Bank Rate is well above
current central market expectations. "My own central projection projection will
require one or two quarter point rate increases per year over the three-year
forecast period. That path would bring us closer to the neutral policy rate,"
Vlieghe said. At the upper limit that would take Bank Rate up to 2.0%, whereas
money markets have tended to show Bank Rate heading up only to around 1.25%
three years out. "My central forecast for policy rates is slightly above the
conditioning path of rates derived from market yields in the May Inflation
Report forecast, which assumes just under three quarter point rate increases
over the three-year forecast period," Vlieghe said.
     -Vlieghe acknowledged the uncertainties around the outlook for consumer
spending but said that he agreed with the MPC's central estimated of 1% growth a
     -Vlieghe did not restate the MPC's guidance that asset purchases will only
be unwind when Bank Rate is around 2%, instead saying it would start when they
were at a level from which they could be moved in either direction. This part of
the MPC guidance is up for revision, with BOE Governor Mark Carney saying that
they will revisit it.
--MNI London Bureau; tel: +44 203-586-2223; email:
MNI London Bureau | +44 203-865-3812 |