BOE Monetary Policy: McCafferty vs. Vlieghe

Bank of England (BoE) is seeing a serious fight within its Monetary Policy Committee (MPC) as some members are strongly advocating for a rate hike while other see virtue in waiting further. At the last meeting in June, three of the MPC members called for rate hikes of 25 basis points, while keeping the other monetary stimulus measures in place.

In a newspaper interview published on Tuesday, Ian McCafferty, a prominent hawkish member of the committee said, " I feel on the balance of monetary policy that there is a need for change……….I think this would be justified and would be the prudent thing to do at this stage." He said that he is calling for a hike and did so at the last meeting because “the economy has not slowed to the extent we feared it would last summer and meanwhile inflation has been high”.

Meanwhile, his colleague and a relatively new member of the MPC committee, Gertjan Vlieghe made the dovish case on Monday. Speaking to the Independent, Mr. Vlieghe said, “This is an environment where a premature hike would be a bigger mistake than one that turns out to be slightly late…….I think the consumption slowdown is here, it’s not over. I don’t think there’s going to be a sufficient offset from investment and net exports to compensate for that”.

Both members, however, stressed that their future decisions were dependent on the data and on the extent to which business investment and net export growth offset weaker consumption in the months ahead.