The contribution of the Monetary Policy Committee of the Bank of England over the last ten years to the goal of maintaining a low inflation environment in the UK has been significant. The monetary policy framework has also been broadly successful, and part of this success can be attributed to the Bank of England Act 1998.
The evidence we have received suggests that the economic environment in which the MPC operates in future might not be as benign as in the last decade. We are concerned, therefore, at the lack of understanding of monetary policy by the general public, especially given this potential for a less benign economic environment ahead.
We do not recommend changes to the mandate of the MPC, nor to the policy instruments it has at its disposal. We support the symmetrical nature of the current inflation target.
We are content with the current size of the MPC. We recommend a single term for 'external' members of the MPC of up to six years, with no reappointment. We welcome the Government's changes to the appointments process. We recommend, to prevent delays in appointing 'external' MPC members, the creation of a confidential pool of candidates that can be drawn from at short notice. We also argue that the positions of the Governor and of the two Deputy Governors should be recruited by open advertisement as well as confidential search.
We recommend changes to enhance the transparency of the MPC, including immediate publication of a record of the votes of each MPC member after MPC decisions are released, greater transparency of individual MPC members' positions in the minutes of the MPC, and further work on improving the public's understanding of monetary policy.