Question

Bank of England Silences Monetary Policy Committee Members (from your textbook, page 249)
Philip Inman
The Guardian
March 14, 2013

The Bank of England will prevent members of its interest rate-setting committee from publishing individual opinions on the economy despite a review of its procedures calling for greater transparency. The Bank said a "collective forecast" will remain the centerpiece of the monetary policy committee's monthly reports, effectively barring members from explaining their own views on the likely path of economic growth, inflation, and unemployment. Critics of the Bank's policy said the Bank's governor, Sir Mervyn King, had rejected proposals for the public to see a wider range of views because he wanted to maintain a stranglehold on the direction of policy...In response, the Bank said it agreed some procedures were opaque and there was a need for clear lines of responsibility, but said that criticism of the monetary policy committee, which King chairs, were largely unfounded.

Explain why then-Bank of England Governor Mervyn King would want to prevent members of the monetary policy committee from stating their own views. Think about this within the context of inflationary expectations. Why then is the Bank of England calling for greater transparency?

Answer 1

Opinions of key decision makers has huge impact on investors and normal consumers. Any opinion which is not based on full study may move share markets and speculations will further deteriorate an economy. Brexit deal is not happening yet and there are many rumours about it. Many investors are anyways not investing in UK fearing the impacts of Brexit and unsure of new trade deals.

Pound value is going down. UK inflation rates are higher than expected by the bank of England. The economists have warned about recession. Overall, economy picture is not very pleasant. Hence a consensus is needed among policymakers to not create any speculation. If consumer spirits are not up and investors lose further confidence then aggregate demand will go down creating recession in the economy and government will have to pump in more money.