Economists call for radical shake-up of the Bank’s interest rate commission | Monetary Policy Committee

Members of the Bank of England’s interest rate setting body should be appointed by local governments and English MPs to counter groupthink, a former member of Threadneedle Street’s monetary policy committee has said.

David Blanchflower said the committee was dominated by people with little knowledge of the ‘real world’ and that a greater diversity of thought was needed to ensure that the interests of ordinary people were reflected.

Blanchflower, a member of the MPC during the global financial crisis of the late 2000s, said in a proposal he co-wrote with fellow economist Richard Murphy that the committee’s membership should be radically reformed.

Under the plan, the governor would be the only MPC member directly elected by the government. Of the remaining eight committee members, a deputy governor would be appointed by the Mayor of London, three members by the governments of Scotland, Wales and Northern Ireland, and four by regional committees of MPs to represent England outside London. Members would be appointed for a single fixed term and supported by strong regional offices of the Bank.

Currently, the committee consists of five Bank insiders and four independent members elected by the Treasury. The Bank’s three deputy governors at the MPC have all worked in the Treasury, while three of the four outside members are economics professors.

Blanchflower and Murphy said dissent about the MPC was rare because its members had similar backgrounds and life experiences. There was a built-in bias towards banking and the City of London, they added.

“There is a role for a monetary policy committee, but it must be accountable and representative,” Blanchflower said. “Our proposal diversifies the professional and regional experience of the committee members in a way to ensure that the interests of ordinary people are better reflected in the Bank of England’s decision-making processes. We must encourage diversity of views to stop the groupthink that has dominated the MPC since its inception.”

The Bank has recently come under fire from left and right after raising interest rates in the last six MPC meetings – from 0.1% to 1.75% in response to rising inflation, which comes in at 9.9% . Blanchflower and Murphy published their proposal for Thursday’s meeting at which the MPC is expected to increase the cost of borrowing by at least 0.5 percentage points.

Murphy said: “The current MPC brings together a range of people with deep economic experience rather than a wide range of economic experience that could be of greater benefit in making decisions with huge real-world implications for the people of this world.” country. We don’t need theoretical answers to the current crisis, we need real ones. Only by changing the composition of the MPC can that be delivered.”

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