During its almost three decades in operation, 51 economists and central bankers have been members of the Bank of England’s Monetary Policy Committee (MPC). However, a lack of diversity on the appointments of committee members has been up for debate.
Issue 14 of INTEREST, from Moneyfacts, includes several insightful stories such as a tax raid on savers, rampant inflation, COVID debt and the impact of Quantitative Easing (QE) and inflation. The latest issue also dissects the MPC and points at concerns over groupthink on interest rate decisions.
In practice, economists who have spent a significant portion of their careers in academia have accounted for a large share of MPC membership over the years. However, concerns have been raised regarding over-representation of former Treasury staff within the MPC.
The House of Lords Economic Affairs Committee (EAC) probed this in its 2023 report, “Making an independent Bank of England work better”. The EAC concluded that it is “imperative” that the MPC’s membership includes people with different “economic perspectives”, and suggested that its hiring practices and appointments processes should foster a “diversity of views and a culture of challenge”.
A lack of diversity of thought among economists appears to be a wider issue. It was identified by multiple witnesses to the EAC’s enquiry as a problem within macroeconomic teaching, and across central banks more generally.
In the high inflation environment of recent years especially, which has put many businesses and much of the population under considerable stress, a dearth of economists on the MPC with recent experience in business, or retail or commercial banking, has arguably been a weakness. The Bank of England would no doubt point out that its network of agents provides the MPC with regular intelligence about business conditions on the ground across the country, but it is not a substitute for that experience being in the room when decisions are made.
The presence of more business economists on the MPC is something that economist and former MPC member Andrew Sentance argued for in a 2022 National Institute of Economic and Social Research essay entitled “Should the MPC have acted differently to control inflation”, written with former Bank of England staffer, Stephen Millard. They suggest “we should be looking to appoint genuine business economists – people who understand the business world and will bring the benefit of that experience to the MPC”.
The MPC conflict of interest and conduct rules may act as a barrier to the appointment of candidates with active commercial interests, or who would wish to resume a business career after their MPC tenure.
As ING economist, James Smith, pointed out in analysis in May 2024 the internal committee members “tend to move as a pack”. He wrote at the time “since November 2021, when the first vote was cast for a rate hike, individual internal members have only voted against the overall majority five times out of a possible 100 votes”.
Economist Tony Yates suggested in a recent opinion piece for the Financial Times that additional external members should be appointed, to enable them to outvote the internals. An interesting proposition, although it would make fuller scrutiny of how and who is appointed as external members even more critical. (Read more on Pages 6 & 7)
Read more in the latest issue of the INTEREST journal, which you can read for free here.
- ENDS
INTEREST is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
Next Issue 25 April 2025. To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk
During its almost three decades in operation, 51 economists and central bankers have been members of the Bank of England’s Monetary Policy Committee (MPC). However, a lack of diversity on the appointments of committee members has been up for debate.
Issue 14 of INTEREST, from Moneyfacts, includes several insightful stories such as a tax raid on savers, rampant inflation, COVID debt and the impact of Quantitative Easing (QE) and inflation. The latest issue also dissects the MPC and points at concerns over groupthink on interest rate decisions.
In practice, economists who have spent a significant portion of their careers in academia have accounted for a large share of MPC membership over the years. However, concerns have been raised regarding over-representation of former Treasury staff within the MPC.
The House of Lords Economic Affairs Committee (EAC) probed this in its 2023 report, “Making an independent Bank of England work better”. The EAC concluded that it is “imperative” that the MPC’s membership includes people with different “economic perspectives”, and suggested that its hiring practices and appointments processes should foster a “diversity of views and a culture of challenge”.
A lack of diversity of thought among economists appears to be a wider issue. It was identified by multiple witnesses to the EAC’s enquiry as a problem within macroeconomic teaching, and across central banks more generally.
In the high inflation environment of recent years especially, which has put many businesses and much of the population under considerable stress, a dearth of economists on the MPC with recent experience in business, or retail or commercial banking, has arguably been a weakness. The Bank of England would no doubt point out that its network of agents provides the MPC with regular intelligence about business conditions on the ground across the country, but it is not a substitute for that experience being in the room when decisions are made.
The presence of more business economists on the MPC is something that economist and former MPC member Andrew Sentance argued for in a 2022 National Institute of Economic and Social Research essay entitled “Should the MPC have acted differently to control inflation”, written with former Bank of England staffer, Stephen Millard. They suggest “we should be looking to appoint genuine business economists – people who understand the business world and will bring the benefit of that experience to the MPC”.
The MPC conflict of interest and conduct rules may act as a barrier to the appointment of candidates with active commercial interests, or who would wish to resume a business career after their MPC tenure.
As ING economist, James Smith, pointed out in analysis in May 2024 the internal committee members “tend to move as a pack”. He wrote at the time “since November 2021, when the first vote was cast for a rate hike, individual internal members have only voted against the overall majority five times out of a possible 100 votes”.
Economist Tony Yates suggested in a recent opinion piece for the Financial Times that additional external members should be appointed, to enable them to outvote the internals. An interesting proposition, although it would make fuller scrutiny of how and who is appointed as external members even more critical. (Read more on Pages 6 & 7)
Read more in the latest issue of the INTEREST journal, which you can read for free here.
- ENDS
INTEREST is dispatched in advance of meetings of The Bank of England’s Monetary Policy Committee and is distributed free of charge.
Next Issue 25 April 2025. To receive the latest issue and sign up please visit: https://www.moneyfactsgroup.co.uk/magazines-and-reports/interest/
Have an opinion? Letters to the Editor invited:
interest@moneyfacts.co.uk
