Economists call for radical shakeup of Bank’s interest rate committee | Monetary policy committee

A former member of the Threadneedle Street monetary policy committee said members of the Bank of England’s rate-setting body should be appointed by a decentralized government and British MPs to combat groupthink.

David Blanche Flower said the committee was dominated by people with little knowledge of the “real world” and more diversity of thought was needed to ensure the interests of ordinary people were reflected.

Blanche Flower, a member of the MPC during the global financial crisis in the late 2000s, said in a proposal co-authored with economist Richard Murphy that the committee’s membership needed to be thorough. reform.

Under the plan, the governor will be the only MPC member directly selected by the government. Of the other eight committee members, a lieutenant-governor will be appointed by the Mayor of London, three by the Scottish, Welsh and Northern Ireland governments and four by councillors’ regional committees to represent England outside London. Members are appointed for a single fixed term and are supported by the Bank’s strong regional offices.

Currently, the committee consists of five bank insiders and four independent members elected by the Treasury. All three of the MPC’s deputy bank governors have worked at the Treasury Department, while three of the four external members are professors of economics.

Blancheflower and Murphy say dissent against the MPC is rare because its members have similar backgrounds and life experiences. They add that there is an inherent bias against banking and the City of London.

“The MPC has a role, but it has to be accountable and it has to be representative,” Blanche Flower said. “Our proposal diversifies the professional and regional experience of committee members, which will surely ensure that the interests of the general public are better reflected in the Bank of England’s decision-making process. We need to encourage diversity of views to prevent the dominance of the MPC since its inception groupthink.”

After raising rates at the past six Monetary Policy Committee meetings, the bank has recently come under fire from both left and right – from 0.1% to 1.75% in response to rising inflation, which is at 9.9%. Blanchflower and Murphy unveiled their proposals ahead of Thursday’s meeting, where the MPC is expected to raise borrowing costs by at least 0.5 percentage points.

Murphy said: “The current MPC brings together a range of people with deep economics experience, rather than broad lived economics experience, which may be more beneficial when making decisions that have huge real-world implications for the people of this country. For In the current crisis, we don’t need theoretical answers, we need real answers. It can only be achieved by changing the composition of the MPC.”