Our panel more hawkish after strong signals

WITH recent indicators suggesting that the UK’s economic growth has firmed in the third quarter, City A.M’s shadow monetary policy committee maintains that no further loosening is necessary

Two members, Allister Heath and Simon Ward, are now in favour of hiking bank rate by 0.5 per cent and 0.25 per cent respectively, and all support for additional quantitative easing has evaporated.

As recently as June, the panel was split, with three members in favour of an increase in asset purchases.

With the Bank of England’s own monetary policy committee backing new governor Mark Carney’s forward guidance policy, no change in the official stance is expected after the meeting today.

The Bank’s new policy suggests that a rate hike will not be considered until unemployment falls to seven per cent.

CITY A.M. SHADOW MPC VOTES MORE NARROWLY TO HOLD RATES

ALLISTER HEATH | CITY A.M.
“All indicators are now suggesting that the economy has strengthened at a rapid rate during the third quarter, making the continuation of the Bank’s ultra-loose and distortionary stance even more dangerous. Bank rate should be hiked to 0.75 per cent.”

GRAEME LEACH | INSTITUTE OF DIRECTORS
“There’s no need for any change in policy yet. The economy is on the up but the length and strength of the current recovery remains uncertain.”

SIMON WARD | HENDERSON
“We need a quarter-point Bank rate rise. Monetary conditions are too loose, as evidenced by non-financial M1 expansion of 11 per cent – a nine-year high.”

GEORGE BUCKLEY | DEUTSCHE BANK
“If the recovery goes to plan, and unemployment falls quickly enough, rates could eventually begin to rise two years from now. But until then no policy move is needed in that scenario.”

VICKY PRYCE | EX-GOVERNMENT ADVISER
“Hold - data are improving all the time and forecasts for the UK have been revised upwards. However real disposable incomes are constrained and uncertainties remain.”

ROBERT WOOD | BERENBERG BANK
“No change. The economy is recovering as uncertainty falls and low rates get consumers spending. This is far from the nirvana of a broad based recovery, but more stimulus won’t solve that.”

TREVOR WILLIAMS | LLOYDS BANK
“The recovery remains on track, but output is still three per cent below its peak. There are too many international headwinds to contemplate anything other than leave rates and QE on hold.”

SAMUEL TOMBS | CAPITAL ECONOMICS
“The strengthening recovery and recent fall in market rates has eliminated the need for more QE. But with inflation weakening and unemployment high, there is no need to raise rates.”

ROSS WALKER | RBS
“No change. Further evidence of an acceleration in GDP growth in the third quarter, alongside solid labour market data, weigh against any monetary policy loosening.”