APPENDIX 3: CALL FOR EVIDENCE
The Economic Affairs Committee has decided to conduct
an inquiry into 'The Current State of Monetary Policy'.
Evidence is invited by Wednesday 8 November.
Since 1997 monetary policy in the United Kingdom
has been delegated to the Bank of England's Monetary Policy Committee
which has a remit set by the Chancellor to control inflation.
The Economic Affairs Committee has produced a number of reports
on the conduct of monetary policy by the MPC. The last was published
in November 2005. The aim of the present inquiry is to update
this, by covering the period since then.
The Economic Affairs Committee would welcome evidence
on issues thought to be important to monetary policy over the
past year, including any or all of those listed below.
1. How well has the MPC conducted monetary policy
in the last year?
2. What are the main factors likely to affect inflation
over the next twelve months?
3. Should the MPC react differently to inflation
due to demand and to that due to supply shocks, for example, to
increases in consumer spending and to oil price rises?
4. Monetary policy relies on interest rates affecting
inflation. What, in practice, is the strength of the link between
the repo rate and inflation, and what is the probable length of
the lag in the transmission mechanism between the two?
5. How important for the conduct of monetary policy
have the recent revisions to the measurement of GDP been?
6. The MPC seems to put considerable weight on forward
rates and survey inflation expectations in its assessment of market
sentiment about future inflation. How useful is this information?
7. Given the extent to which international capital
markets are integrated, and the impact of US and euro interest
rates on these markets, how much independence of action does the
MPC have in setting UK rates?
8. Unlike the early external appointments to the
MPC, recent appointments have not been monetary economists. How
important is it that monetary economists are appointed? What should
be the criteria for appointment?
9. At present the MPC appears to play little or no
role in the selection of appointees to the MPC. What role, if
any, should the Bank of England play in these appointments?
10. In public speeches, some new members of the MPC
have emphasized the lack of investment in the United Kingdom and
the significance of the rate of unemployment for inflation. How
important are these issues for inflation?
11. Should the MPC be concerned about the behaviour
of asset prices, particularly house prices? How has the stance
of monetary policy affected asset prices?
12. Are there any problems arising from the separation
of decision-making on monetary and fiscal policy? What have been
the implications for the conduct of monetary policy of changes
in the stance of fiscal policy in recent years?
| 
