How members of the independent panel of economic and financial experts voted,
and what they said in full:
Sir Alan Budd
Former Chief Economic Adviser to the Treasury, founding member of the Bank of
England's MPC
Cut by a half-point
"It is still worth taking steps to encourage spending, particularly by
businesses, even if the main problem is the availability of credit rather
than its cost. "
Bronwyn Curtis
Head of global research, HSBC
Cut by a half-point
"If I had a pound (sterling that is), for every "lowest since…"
quote since September last year my piggy bank would be overflowing. Consumer
confidence has hit a record low, sterling is back to mid-1970s levels when
the IMF was called in and the economy is in recession with little relief in
sight. The angst over imported inflation is misplaced, just as it was when
the UK left the ERM in the early 1990s. While there is room to cut interest
rates this should be the preferred option. Interest rates changes are easy
to explain; unconventional measures are not. Consumers and businesses are
already unnerved by the announcement of so many measures that have never
been used before. "
Geoffrey Dicks
Leading City economist and forecaster
Cut by a half-point
"The value of interest rate cuts as a way of stimulating demand has
almost run its course. Increasingly, with the Asset Purchase Facility given
the go-ahead from the Treasury, the Bank will turn to other measures to get
corporate and mortgage lending flowing again. Even so, against an
increasingly dire economic background, I would go for one more (probably the
last) 50bp cut ahead of any implementation of other, less conventional,
measures ."
Professor Charles Goodhart
London School of Economics, former member of the Bank of England MPC
Cut by a half point
"This month is difficult since the MPC will have a forecast, and will
therefore have different, and more, information than the rest of us.
In current conditions I tend to think that quantitative easing would have more
traction than reductions in interest rates, so I would be quite keen to get
interest rates down quickly to a level where that could begin, which would
imply a cut of 1% or 1 1/4%. But I remain concerned about the danger of
unhinging the exchange rate, a danger which now has political overtones as
well as economic. So I shall remain conservative, and vote for another
boring 1/2% cut, (but if the real MPC goes for a bigger cut, I shall be
quite pleased). "
Anatole Kaletsky
Chief economics commentator and Editor-at-Large, The Times
Cut by 1.5 points to zero
"I vote for an immediate reduction to zero (or, if this is more readily
manageable for operational reasons, a US-style range of zero to 0.25%).
The Bank has already acknowledged that a period of quantitative easing and
other forms of unconventional monetary policy are likely to be required
before financial markets return to normal. If this is the case, then the
sooner it gets on with QE the better - and the shorter the period of
unconventional policy that will be required.
Moving towards zero rates: Trying to target interest rates by small monthly
steps merely creates uncertainty and distracts policymakers from the main
issue, which is designing a temporary quantitative easing policy that will
work. While the Bank can, in theory, provide more liquidity to boost
industrial and mortgage lending directly, its attempts to target a low but
arbitrary positive interest rate is a major obstacle to the implementation
of such new credit policies, which are now urgently required.
There is no point in waiting any longer to implement zero interest rates,
since global economic conditions continue to deteriorate - industrial
activity and consumer demand in many European countries are now even weaker
than in Britain.
The one argument for delay which may have carried some weight in December and
January was the weakness of sterling. But this no longer applies, since the
pound appears to have found a floor and the dollar's performance in response
to the Fed zero rate policy suggests that markets now understand the
benefits of this approach."
Rupert Pennant-Rea
Former Deputy Governor of the Bank of England. Chairman of Henderson plc
Hold
"Not before time, ministers have announced various measures that will
assist bank lending. Since these take time to implement and then to take
effect, we shouldn’t expect a sudden and strong revival in lending. My hunch
is that more needs to be done, probably through the establishment of a “bad
bank” to clean up the balance sheets of the banks. With that in place,
monetary policy would then have some effective channels to work through.
Even so, the imperative for policy right now is patience. For months the
economy has been bombarded by fiscal and monetary initiatives, many of them
unprecedented. Judging their effects is little more than guesswork, but we
do know they will take time to come through. Although the political and
media consensus is that the results will be inadequate, I’m not so sure. It
is surely possible that, three years from now, firms and households will be
facing the consequences of excessive stimulus.
Al in all, the MPC can safely wait till the fog lifts a bit. My vote this
month: no change."
Sir Steve Robson
Former Second Permanent Secretary to the Treasury
Hold.
"The issue is not the cost of credit but its availability. An interest
rate cut would do little part from put unhelpful pressure on sterling. Post
war recessions have had their origins in either high inflation or large
current account deficits. The origins of this one are global imbalances
coupled with lax monetary policies. These produced a bubble which burst and
destroyed confidence. We need policies which are seen to address these
issues. On imbalances and better monetary policies we see no recognition of
the need for change. On confidence we have some measures, like the
Government's intention to provide some guarantees for bank assets. We need
to go further. The Bank/Treasury need to start buying assets to unlock
credit markets and put money into the economy."
Dr Sushil Wadhwani
Former member of the Bank of England MPC. Heads Wadhwani Asset Management
Cut by three-quarters of a point
"I would vote to cut the Bank rate by 75 basis points this month, and
make it clear that policy is heading towards quantitative easing, with zero
interest rates supported by asset purchases.
Policy measures here and abroad so far have helped averted economic "meltdown",
but with the financial sector a shadow of its former self and the global
economy slowing we are still facing a long and severe recession. It would be
a mistake for the Bank to give any signal of a pause in the process of
easing, as this would prolong the recession. The Bank needs to get interest
rates to zero quickly, and to proceed to unorthodox measures. These should
include direct easing of credit conditions through purchases of corporate
assets, but also support for the government's fiscal stimulus by
underfunding, to increase aggregate demand in the wider economy."
Martin Weale
Director of the National Institute of Economic and Social Research
Cut by 1 percentage point
"I am voting for a reduction to 1 per cent. While we have yet to hear
full details, it does look as though the government has realised that the
problem is not so much the current level of interest rates as unwillingness
of banks to lend. Now that this is being addressed I can see some point in a
further reduction."
