BOE’s Carney Wants Fed-Style Schedule in MPC Decision RevampScott Hamilton
The Bank of England wants to move to a Federal Reserve-style decision schedule and start releasing immediate minutes as Governor Mark Carney overhauls the monetary-policy framework set up more than 17 years ago.
The BOE plans to change to eight meetings a year in 2016 from one a month currently, while it also announced that transcripts will be released with an eight-year lag. In addition, officials will speed up publishing the record of gatherings, with minutes and the quarterly Inflation Report released alongside decisions from August next year.
The shakeup continues Carney’s overarching transformation of the 320-year-old institution after already revamping management and operations, and introducing forward guidance on borrowing costs. Speaking at a press conference in London today, he said the latest moves mark the “most significant set of changes” to interest-rate decisions since the Monetary Policy Committee was formed in 1997.
The changes to the meeting schedule, which follows a review by former Fed official Kevin Warsh, will require parliamentary approval. Chancellor of the Exchequer George Osborne welcomed the proposals and said he’ll consider the BOE’s request for fewer meetings.
Warsh was commissioned by the BOE in April after lawmaker criticism of the central bank when it revealed recordings of meetings are destroyed once they have been used by note-takers to write up the minutes. Explaining his recommendation on the timetable, Warsh said the current schedule is “inconsistent with best practice.”
“Real transparency doesn’t always mean ‘more’, but it should always mean ‘better’,” he said.
Changing the timetable of MPC announcements to six weeks would bring the BOE closer to the practices at the Fed and the European Central Bank, which is also changing its schedule from next month to an eight-meeting-a-year schedule.
Carney said some of the changes are intended to improve coordination between the MPC and the BOE’s Financial Policy Committee, which aims to prevent another banking crisis. Four joint meetings of the panels will be scheduled for 2016.
“The bank now has immense responsibilities for monetary stability, financial stability and for microprudential regulation,” Carney said. “With these responsibilities comes the need for effective transparency, genuine accountability and robust governance.”
In the Group of Seven, the Fed and the Bank of Canada, which Carney once ran, schedule rate-setting meetings eight times a year, meaning every six weeks. The Bank of Japan has 14 gatherings on its timetable this year, while the Reserve Bank of Australia has 11.
Since the global financial crisis of 2008, central banks around the world have signed up to even greater transparency. The Fed has adopted an inflation goal, produced more explicit economic forecasts, begun regular press conferences by the chair and released the expectations of officials for the appropriate path of interest rates. A number of institutions have adopted forms of so-called forward guidance to shape the thinking of investors.
The BOE’s nine-member MPC usually announces its decision on the Thursday of the first full week of the month after a two-day meeting and releases minutes 13 days later. Officials also produce quarterly forecasts.
To facilitate the release of minutes alongside decisions, the MPC’s internal schedule will be altered. The first part of the panel’s meeting, currently held the day before the decision, will move to around one week earlier. The second part, presently held in the morning of the day of the announcement, will be split into two, with policy makers voting the day before the decision is released.
The BOE’s plan is that only the latter stages of the process will be transcribed.
Some former and current BOE officials had indicated they would favor not publishing transcripts. Ex-Deputy Governor for Monetary Policy Charlie Bean said in May before his retirement the following month that he was “not a huge enthusiast for transcripts,” arguing it may lower the quality of the debate. Current policy maker Kristin Forbes said that “such a result could undermine the effectiveness of the MPC.”
“Taken together, these changes to our monetary policy process and our governance and transparency arrangements are intended to put the bank at the forefront of international best practice,” Carney said. “They will strengthen the ability of Parliament and the public to hold us to account.”
As part of the announcement today, the BOE said it will publish minutes of meetings during the financial crisis of its governing board, known as the Court, in January 2015. The central bank said they will be released in an “appropriately redacted form.”