MNI STATE OF PLAY: Chary BOE MPC Insiders To Stand Pat In May

--MPC Bank Insiders' Track Record Demonstrates Caution Over Tightening 

--Soft Recent Data Likely To Delay Bank Rate Hike

By David Robinson

     LONDON (MNI) - The Bank of England insiders on the Monetary Policy

Committee (MPC) are expected to vote together to head off a rate hike at the

upcoming meeting, to be held May 10.

     Since Summer 2011, not one of the Bank insiders, the five full-time top

Bank officials on the nine strong MPC, has voted in the minority for a rate

hike. The only time any of them voted for an increase was when Bank Rate was

finally raised from 0.25% to 0.50% at the November 2017 meeting and the

widespread expectation is that they will close ranks again in May in opposing a

hike.

     Analysis of the MPC's voting record shows Bank Governor Mark Carney, Deputy

Governor Ben Broadbent and Chief Economist Andrew Haldane have never cast a

dissenting vote in their time on the MPC. The other two deputy governors, Jon

Cunliffe and Dave Ramsden, have broken ranks one time each but only to oppose

last November's 25 basis point rate hike.

     --LITTLE INSIDE DISSENT

     The last Bank insider to break ranks and vote with the minority for a rate

increase was former Chief Economist Spencer Dale, who voted unsuccessfully for a

25 basis point rate hike at each meeting from February through August 2011. 

     Of the current members Deputy Governor Jon Cunliffe has dissented only once

at the 49 meetings he has attended, or 2.13% of the times, voting against

November's hike in favour of unchanged policy. Newcomer Deputy Governor Dave

Ramsen, who has only voted at five meetings, also, as noted, opposed that hike.

     The repeat dissenters in favour of tightening have been the externals,

Michael Saunders, who has broken ranks 30.77% of the time in support of raising

Bank Rate and Ian McCafferty, who has dissented on Bank Rate at 24.59% of the

votes, again each time in favour of a higher rate, according to MNI

calculations.  

     Former external MPC member Kristin Forbes used her final MPC speech in June

last year, entitled "Failure to Launch", to explore why it had been so hard to

get the policy rate on the path upwards. She looked at the insider/outsider

split on the committee, arguing that things changed after 2013.

     Over the first 16 years that the MPC was operating, in 1998 through 2013,

around 10% of the MPC votes cast were dissents and 34% of these were cast by

internals, with former Governor Mervyn King even ending up at times on the

losing side. Since 2013 not a single hawkish dissent has come from an insider.

     Forbes said it was hard to identify what had driven the change but she

floated the possibility that the wider remit of the Bank and the greater

expectation on central bankers to deliver not just stable inflation but to

support the broader economy may have been a factor. 

     Another explanation, is that the internals are simply more conservative and

reluctant to sanction tightening policy when it is a moot point whether it is

justified.

     --MAY DELAY

     The May MPC meeting could well illustrate the point. The most recent

activity data, with quarterly first quarter GDP growth put at just 0.1% in the

preliminary estimate, have been strikingly weak and headline inflation, at 2.5%

in March, was 0.3 percentage point below the Bank's forecast.

     Saunders spelled out in an April 20 speech why the slowdown apparent in

recent weak data may prove ephemeral and he focussed instead on the bigger

picture of an economy with little or no slack left. McCafferty broadly shares

Saunders' analysis and both could again vote for a 25 basis poi hike in May,

having backed one at the March meeting. 

     The majority view, however, which all five Bank insiders could well sign up

to, is that the committee has time to wait and see how things unfold and whether

the slowdown is more than just weather related froth. The insiders' cautious

approach is expected to prevail again when the policy decision is announced

Thursday.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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