The minutes of the Bank of England’s MPC meeting in March released on Wednesday morning show that the committee lines up in exactly the same way as it did last month.

One member (Posen) wants to ease monetary policy, by increasing QE. Five members (King, Tucker, Fisher, Bean, Miles) voted for no change at all. Two members (Weale, Dale) voted for a 25 basis points increase in bank rate. And one member (Sentance) voted for a 50 basis point increase.

Nine economists, four different views!

The majority view on the committee held steady in the face of the oil shock, which threatens to raise inflation above the 5 per cent threshold in the next few months. The markets view Charlie Bean as one of the key swing votes in this group, and his recent comments have suggested that he is shifting in a dovish direction, as he becomes less confident about the strength of the UK economy.

Recent data in that area have started to look a little worrying. The construction sector seems to be in free fall, even after the weather has started to improve. And the retail sector has also been very weak. Downmarket retailers, which had previously been largely unscathed as consumers had moved into cheaper products, have recently started to feel the pinch. This is not too surprising, given the squeeze in living standards for employed workers, and the fact that many in the public sector are starting to get really worried about their jobs and pension arrangements.

For these reasons, the majority of the committee is disposed to wait a little longer before sanctioning any rise in bank rate. I am sure they are also well aware of the budgetary tightening which is just starting to hit the economy (2 per cent of GDP this year), and are reluctant to add to that by raising rates too early.

I am told by friends in the Bank that the burden on the institution has felt very heavy recently. Not only is the Bank getting attacked for persistently missing its inflation target, but it is also trying to re-integrate responsibility for bank regulation into the organisation. Top officials at the bank seem to have a very different take on how severe the new regulatory regime should be towards the financial services industry, and they recognise that a lot of difficult thinking still has to be done.

In the old days, people used to joke that Mervyn King believed that all the duties of a central bank could be adequately performed by about 12 people with good PhDs in economics. The rest were surplus to requirements. That was when it only had to focus on inflation, and the increase in the CPI never seemed to budge far from the 2 per cent target.

Things are very different now.

This entry was posted by Gavyn Davies on Wednesday, March 23rd, 2011 at 10:45 and is filed under Capital markets, People. Tagged with Adam posen, bank of england, Charlie Bean, inflation, interest rates, mervyn king, Minutes, mpc, paul tucker. Edit this entry.