Bank of England policymakers warn communication shift could weaken MPC consensus

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BoE policymakers warn on MPC consensus

Highlights

Bank of England in April stopped publishing a single central economic forecast, replacing it with three distinct scenarios and more individualized MPC member vote explanations.
MPC members Megan Greene and Alan Taylor warn scenario-based communication and individualized vote disclosures may weaken efforts toward consensus and collective discussion within the committee.
Despite Greene voting for a rate increase to 4% and Taylor favoring no change, both present alternative economic scenarios, highlighting concerns that BoE’s new approach may not fully address UK economic risks.

Concerns over scenario-based guidance

As reported by Reuters, MPC member Megan Greene says the Bank of England's shift away from a single central economic forecast, combined with adding individual explanations of rate votes in meeting minutes, may discourage policymakers from trying to reach a collective position.

In April, the BoE suspended publication of one central forecast for the economy and replaced it with three separate scenarios. Last year, it also began publishing individual MPC members' own explanations of their votes in policy minutes, changes that partly follow recommendations from former Federal Reserve Chair Ben Bernanke.

Greene says the inclusion of individual views in the minutes is positive overall, but it also creates new difficulties. In a written statement to parliament's Treasury Committee, published on Wednesday as part of the renewal of her MPC position, she says the changes may reduce the willingness of members to discuss issues with one another and try to persuade each other.

Debate spans opposite ends of rate outlook

Alan Taylor, another external MPC member, expresses similar concerns, saying at a conference hosted by Barclays and the CEPR think tank that heavier use of scenario-based communication increases, rather than reduces, the importance of improving the central forecast, even if it is discussed less or temporarily removed.

Greene and Taylor sit at opposite ends of the MPC policy spectrum. Greene is among the minority who vote to raise rates to 4% at this month's interest rate decision, while Taylor votes to keep rates unchanged and says cuts may be needed if inflation pressures ease.

Despite those different policy preferences, both Greene and Taylor outline alternative scenarios to the three published by the BoE in April, arguing their versions better capture some of the risks facing the UK economy.

In our earlier coverage of the 10-year assessment of Brexit’s economic impact, we examined how higher trade barriers, weaker investment and the post-2016 fall in sterling have been associated with lower real incomes and a smaller UK economy than it might otherwise have been. We also noted that new trade deals have not fully offset these costs and that migration patterns shifted, adding pressure on public services. That backdrop helps frame today’s debate over the Bank of England’s policy communication and how officials weigh risks to growth and inflation.

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