The Bank of England’s rate-setters should sit on their hands today, making no change to interest rates or the scale of quantitative easing, The Times Monetary Policy Committee recommends.

More positive signs from the economy, coupled with the £175 billion asset-purchase programme already under way, have convinced eight of the nine experts on The Times MPC that the Bank should wait another month before making policy changes.

Charles Goodhart, a former member of the Bank’s MPC, suggested that the panel wait until next month to decide whether to take action, when it will have access to the Bank’s quarterly Inflation Report.

Sir Alan Budd, a former chief adviser to the Treasury and a former member of the Bank’s MPC, agreed. “The decision on whether to extend ... beyond £175 billion can be left until the November meeting,” he said.

However, Sir Steve Robson, former Second Permanent Secretary to the Treasury, said that the Bank should halt quantitative easing immediately and start selling gilts within weeks.

“Quantitative easing appears to have had no significant effect other than the adverse one of helping to fuel equity and commodity price rises,” he said. He also called for the Bank to cut the interest rate offered on its reserve accounts.

His suggestion that the Bank starts an immediate sell-off of gilts contrasted with the views of several other panel members, who urged the Bank to hang on to the gilts and corporate bonds it had purchased under the quantitative easing scheme until the economic situation settled down.

Sushil Wadhwani, a former external member of the Bank’s MPC, said: “The MPC should now start to give more details of its exit strategy, making it clear that it will be patient. Otherwise, there is a danger that market interest rates will rise and confidence damaged.”

His concerns were shared by Anatole Kaletsky, editor at large and chief economics commentator at The Times. “I think the Bank should start to discuss exit strategy and, in particular, it should state explicitly that the end of gilt purchases will not mean that it disposes of the gilts it owns already, still less that it begins to increase rates,” he said.

Rupert Pennant-Rea, chairman of Henderson Group and former deputy governor of the Bank of England, said that while the Bank should leave open the possibility of increasing the current limit on quantitative easing, it also needed to “sketch out its thinking on reversing quantitative easing ... There is no conceptual mystery about how to reverse quantitative easing. The tricky issues are when to start and how fast to go.”

The increasing importance of considering the fiscal environment as the election looms and the country’s debts deepen was underlined by several panel members. “Monetary policy has to be closely co-ordinated with fiscal policy,” Bronwyn Curtis, head of Global Research at HSBC, said.

Mr Kaletsky went a step further, calling for Mervyn King, the Bank’s Governor, to publicly state that the MPC would pay even closer attention than normal to the stance of fiscal policy.

He suggested that the Governor or the MPC make clear that “if fiscal policy is tightened significantly in the coming years, the MPC will keep interest rates substantially lower for longer than they otherwise would be”.

The verdicts

Bronwyn Curtis, head of Global Research, HSBC Bank

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “Whoever forms the Government will have to tighten policy”

Sir Alan Budd, former chief economic adviser to Treasury and former member of the Bank’s MPC

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “The more that the MPC can tell us in general about how it will respond to future developments, the better”

Rupert Pennant-Rea, chairman, Henderson Group and former deputy governor of the Bank of England

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “There is no conceptual mystery about how to reverse QE; the tricky issues are when to start and how fast to go”

Sushil Wadhwani, former external member of the Bank’s MPC

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “The MPC should now start to give more details of its exit strategy, making it clear that it will be patient”

Sir Steve Robson, former Second Permanent Secretary to the Treasury

Interest rate: hold at 0.5 per cent

Quantitative easing: stop now and start selling gilts “QE appears to have had no significant effect other than the adverse one of helping to fuel equity and commodity price rises”

Geoffrey Dicks, chief economist, Novus Capital Markets

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “Rising house prices ahead of recovery in the real economy is a most unwelcome development”

Martin Weale, director of the National Institute of Economic and Social Research

Interest rate: hold at 0.5 per cent Quantitative easing: no change “The Bank should find a means of making its policy of monetary easing more effective”

Charles Goodhart, professor at the London School of Economics and former member of the Bank’s MPC

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “The MPC should do nothing, say nothing and break early for coffee and biscuits”

Anatole Kaletsky, editor at large and chief economics commentator, The Times

Interest rate: hold at 0.5 per cent

Quantitative easing: no change “Bank should state explicitly that the end of gilt purchases will NOT mean that it diposes of the gilts it owns already”

To read full comments, visit timesonline.co.uk/timesmpc

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