The Bank of England has banned its Monetary Policy Committee members from having private discussions with bankers after rumours swirled that a deputy governor had revealed policy information in a recent meeting with an investment bank.
Market traders have been excited for a week about rumours that Ben Broadbent, deputy governor for monetary policy, had ruled out an interest rate rise at the coming November MPC meeting in a private gathering with bankers.
The central bank said that Broadbent had provided no information that was not publicly available in minutes of previous meetings and expressed irritation that a false impression was circulating in financial markets.
To avoid what it described as inaccurate reports of officials’ words in future and to improve transparency, it confirmed a Reuters story that it had cancelled all future meetings between MPC members and banks.
The BoE declined to release a statement but indicated that, in future, officials would gather intelligence of what was happening in financial markets rather than MPC members themselves.
Many MPC members have thought meetings with bankers were useful to understand concerns in markets, but the practice of meeting close contacts has often allowed rumours to emerge and prompted accusations by traders and economists of favouritism and selective disclosure.
In a note this week, Allan Monks, UK economist at JPMorgan, wrote that “Ben Broadbent is speculated to have pushed back on a November hike due to a desire to see more jobs data, although that would still leave the subsequent meeting live”.
Richard Barwell, head of macro research at BNP Paribas Asset Management, welcomed the BoE’s move saying the banning of meetings with the MPC was “a good outcome for all concerned”.
He suggested the bank should be even more transparent. “There would be no interest in attending these meetings and nothing more for policymakers to say if the BoE adopted a policy of full disclosure and published the contents of the internal policy debate in its entirety, including the outlook for interest rates”.
Sensitivities over the BoE’s monetary policy stance have intensified in recent weeks after the September minutes of the MPC meeting said that the first rate rise could happen this year even as the bank was continuing with purchasing assets under the quantitative easing programme.
The minutes also said the committee saw the benefit in waiting for more information on the effect of the end of the furlough scheme before taking any action, which will not be included in official data before the November meeting.
The BoE said it had been considering a ban on these meetings before the latest rumours, as a result of similar sensitivities in the eurozone after private comments regarding inflation from the European Central Bank’s chief economist, Philip Lane, were reported in the Financial Times.
The results of the BoE’s next MPC meeting will be published on November 4. Financial markets do not expect the BoE to raise interest rates from the current historic low of 0.1 per cent at that meeting, but increasingly believe that a rise to 0.25 per cent is possible at the December meeting.
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