The Bank of England’s recent overhaul of its public communications has prompted concern among some Monetary Policy Committee - MPC - members that the changes could discourage the push for a unified economic forecast. In written and spoken remarks this week, two external members warned the new format may unintentionally weaken intra-committee deliberation.
Earlier this year the central bank stopped issuing a single central forecast in favour of three separate scenarios that outline different possible paths for the economy. Last year the BoE began appending individual MPC members’ explanations of their votes to the minutes of rate decisions. Officials have said the adjustments were made in part following recommendations from former Federal Reserve Chair Ben Bernanke.
Megan Greene, an external MPC member, described the inclusion of individual paragraphs in the minutes as positive overall but said it also created fresh challenges. In a written statement to parliament’s Treasury Committee to mark the renewal of her position on the MPC, published on Wednesday, she warned of an unintended behavioural consequence.
"There is a risk in our shift away from our central forecast and the introduction of individual paragraphs," Greene wrote. "This may reduce the inclination for MPC members to discuss things with one another and try to convince one another."
Alan Taylor, another external member of the MPC, made similar remarks at a conference hosted by Barclays and the CEPR think tank on Tuesday. He argued that the move to scenario-heavy communication actually heightens the need for a robust central forecast.
"The shift towards scenario-heavy communication increases rather than decreases the importance of improving and getting right the central forecast, even if on occasion it is not much talked about, or even taken out," Taylor said.
Greene and Taylor sit at opposite ends of the MPC’s policy spectrum. Greene was among the minority who voted to raise the Bank Rate to 4% at this month’s interest rate decision. Taylor, by contrast, voted to keep rates on hold and has indicated that rates could be cut if inflationary pressures ease.
Both external members have also set out alternative scenarios beyond the three the Bank published in April, arguing their versions better capture some risks they see facing the economy. Their remarks underline a tension in central-bank communications between revealing individual reasoning and preserving incentives for members to reach shared judgements.
While members praised elements of greater transparency, their comments underline the trade-offs the BoE now faces as it balances openness with the desire for a coherent, collective policy forecast.