SUMMARY OF RECOMMENDATIONS
- The Government was right to give operational
independence for monetary policy to the Bank of England, and to
place it on a statutory basis (paragraph 7.3).
- The Treasury and the Bank of England have a duty
to monitor in detail the performance of the Monetary Policy Committee,
and to publish their assessment of it (paragraph 7.2).
- We agree that an inflation target of 2.5 per
cent is appropriate at this time (paragraph 7.6).
- There is a need for further clarification by
the Treasury on the "subject to that" part of Section
11 of the Act (paragraph 7.7).
- We are less than clear whether the decision procedure
of the Monetary Policy Committee is more an art than a science.
They must make their procedure clearer so as to aid public scrutiny,
and re-examine this procedure in order to remove any possible
bias (paragraphs 7.9 and 7.11).
- Appointments of the independent members of the
Monetary Policy Committee must be made in a more open fashion.
Such appointments should be for five years and normally non-renewable
(paragraphs 7.13 and 7.14).
- More attention should be paid to the reasons
for interest rate differential between our interest rate and that
set by the European Central Bank (paragraph 7.10).
- The Court needs to make full use of its powers
with respect to the Monetary Policy Committee, and could play
a more active role (paragraph 7.16).
- The Office for National Statistics needs to play
a more active role in dealing with all the problems that have
emerged in connection with the measurement of inflation, and especially
the role of the harmonised index of consumer prices (HICP) (paragraphs
7.17-7.20).
- Clarification is required of the part that the
external value of sterling plays in the transmission mechanism
of monetary policy to the real economy (paragraphs 7.22-7.23).
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