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From Wikipedia, the free encyclopedia

The Monetary Policy Committee (MPC) is a committee of the Bank of England, which meets every month to decide the official interest rate in the United Kingdom. It comprises:

  • The Governor of the Bank
  • The two Deputy Governors
  • The Executive Director for Monetary Analysis and Statistics, the Bank's Chief Economist
  • The Executive Director for Markets
  • Four external members, appointed by the Chancellor of the Exchequer for a renewable three year term

Each member has one vote of equal weight. The Governor chairs the meeting and is the last to cast his vote, which effectively acts as a casting vote in event of a tie. Representatives from the Treasury can attend the meeting, but only as non-voting observers.

Meetings are held on a Wednesday and Thursday, typically following the first Monday of each month but this is sometimes deviated from in order to interact with the quarterly inflation report process and to take into account other major commitments or to occur when there are relatively fewer data announcements. The interest rate decisions are announced at noon immediately following the Thursday meeting. Minutes of each meeting, which explain the reasons for the decision and list the votes of each member, are published on the Bank's website after a two-week delay.

In each meeting, the committee studies data relating to the UK economy, as well as the worldwide economy, presented by the Bank's economists and regional representatives. Decisions are made with a primary aim of price stability, defined by the government's inflation target, set each year in the Budget (since January 2004 the target has been 2% on the Consumer Price Index). The secondary aim of the committee is to support the government's economic policies, and targets for growth and employment.

Under the Bank of England Act 1998 the Bank's Governor must write an open letter of explanation to the Chancellor if inflation exceeds the target by more than one percentage point in either direction. On April 16, 2007, Mervyn King, wrote the first such open letter in the life of the MPC to Gordon Brown, explaining why the inflation reached 3.1 %, one point beyond the target 2 %. (BBC News)

Traditionally, it was the Treasury that set interest rates. On May 6, 1997, the Bank was granted operational responsibility to set interest rates by Gordon Brown, who was at that time the Chancellor of the Exchequer, and the guidelines for this were formally laid out in the Bank of England Act 1998. The government reserves the right to instruct the Bank on what rate to set in times of emergency.

Membership

To date, 23 men and 4 women have served on the MPC. They are:


Bold names indicate current membership of the committee. The dates listed show when their current terms of appointment are due to end.

Mervyn King, the Bank of England’s current Governor, is the only MPC member to have taken part in every meeting since 1997. Kate Barker is the only external member to date to have been appointed for three terms.

External links

See also

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