April 18 (Bloomberg) -- Bank of England Chief Economist Spencer Dale told Governor Mervyn King that “significant” staff shortages will force him to cut back on research for policy makers during the next six months.
The bank’s Monetary Analysis department will “reduce the number of notes written” for the Monetary Policy Committee, Dale said in a March 25 memo seen by Bloomberg News. “We hope not to have to turn down direct requests” from panel members, he said. A bank spokesman said there will be no reduction in essential research for the MPC.
The cutback comes at a time when the panel is split four ways on interest rates and is entering a quarterly forecast round to prepare for the monthly meeting on May 5. King has imposed a two-year pay freeze on staff, raising the prospect of defections elsewhere in London’s finance industry.
“We will still produce essential notes such as those related to the forecast round,” Dale said. “But the amount of other briefings is likely to fall, including the number of pro-active notes with a medium-term perspective.”
Dale said his department lacks staff because managers haven’t filled vacancies, some economists have transferred elsewhere in the bank, and some have resigned. He projects a 9 percent shortfall in the first half of this year. A lack of staff may persist until new graduate and doctorate-level employees start work in the fall.
The memo is an internal bank document that sets out a plan to deal with a temporary staff shortage, a bank spokesman said in a statement read over the telephone. It will mean some reprioritization of longer-term work, but it will not lead to a reduction in the essential briefing that the committee needs in order to undertake monetary policy, he said.
King has pledged a range of measures to appease staff during the pay freeze, which was imposed in line with the government’s policy for civil servants. These include a cap on canteen food prices, offering dry cleaning facilities, accelerating restroom repairs and providing more microwaves and refrigerators for workers to use for their own food.
Dale said that other measures to cope with the staff shortfall include delaying a workshop on quantitative easing by “a couple of months,” a move he described as “almost unavoidable” because of the specialist skills needed.
“There will be less time spent on research in those areas where staff have left and not yet been replaced,” he said.
Other measures include limiting work for the bank’s new Financial Policy Committee to essential research and not longer-term planning or strategy. Dale will also stop work on a study of bank liabilities for six months and will reduce the number of articles that appear in the central bank’s quarterly bulletin.
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