BoE reduces MPC rate meetings in procedure shake-up

The Bank of England today published an independent report reviewing the Monetary Policy Committee’s transparency practices and procedures.

Related topics:  Finance News
Rozi Jones
11th December 2014
bank of england boe

Federal Reserve Board Governor Kevin Warsh recommended that the Bank adopt reforms in service to what he called the “Big 4” objectives: making sound policy decisions; communicating judgments effectively; ensuring accountability for its actions; and creating a fair and accurate historical record.
 
The MPC accepted the recommendations, and announced that they would make fewer interest rate decisions and will release the minutes of policymakers' meetings instantly instead of waiting for two weeks.

They also announced plans to set rates eight times a year instead of monthly.

The Bank also plan to introduce a series of significant transparency, accountability and governance enhancements designed to improve practice and increase monetary and financial stability.

Alongside these measures, the Bank also proposed a simpler structure for its governing bodies and a clearer commitment to accountability.

In announcing today’s measures, the Governor said:
 
“The Bank now has immense responsibilities for monetary stability, financial stability and for microprudential regulation. And with these responsibilities comes the need for effective transparency, genuine accountability and robust governance. Today I am pleased to announce the most significant set of changes to how we present and explain our interest rate decisions since the Monetary Policy Committee was formed in 1997. Alongside those measures, we have also proposed a number of additional changes that will mark a step change in the governance of this institution. These changes will enhance our transparency and make us more accountable to the British people.”

Andrew Tyrie MP, Chairman of the Treasury Committee, said:

“The Bank has been granted vast powers and responsibilities – more extensive than those of any comparable central bank. Its decisions affect every person and business in the country—not only how much loans and mortgages will cost, but also whether people can have a mortgage. Both much stronger duties of explanation and transparency, and improvements to governance, are therefore essential. “It is crucial that the Bank be required to explain fully its actions and decisions – which have such a profound effect on millions of people.“Today’s announcement about the Bank of England’s governance is welcome. Much of it is the result of persistent pressure from the Treasury Committee. The announcement moves a long way towards most of the Treasury Committee’s long-standing proposals on governance and transparency, also endorsed by the Parliamentary Commission on Banking Standards.

“A crucial task for the Treasury Committee will be to examine how the Bank operates these new arrangements in practice, and in particular, the extent to which the enhanced transparency and explanation now required of the Bank can encourage good decision taking. This will be the acid test. “The Bank will have an organisational structure more recognisably that of a modern institution, in keeping with its greatly expanded powers and responsibilities. It will also have a body – a board in all but name – unambiguously in charge of managing its business. “Some of the announcements today will require legislation. The creation of a new Deputy Governor post already meant that the Bank of England Act would need amendment. The Treasury Committee will want to scrutinise carefully all the legislative proposals that the Government puts forward.”

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