ex financial times editor richard lambert will cast key vote in borrowing costs decision taken by the bank of england in august
The balance of power on whether the Bank of England (BOE) cuts interest rates at its 100th meeting rests with an ex-journalist. There is also the tantalising prospect of the central bank governor being on the wrong side of the monetary policy decision in coming months for the first time.
The minutes of the bank's most recent meeting on 7 July, published last week, showed a five/four split to keep the benchmark interest rate on hold at 4.75%. Richard Lambert, who joined the UK central bank's monetary policy committee in June 2003 after a decade as editor of the Financial Times, looks like the key swing voter next month.
Five Bank of England executives plus four so-called independent members comprise the rate-setting panel. Lambert teamed up with four full-timers to nix lower rates this month. One of them, deputy governor Andrew Large, ended a three- meeting streak of calling for higher rates at this month's gathering. Another, Paul Tucker, also wanted borrowing costs to rise at three consecutive meetings, though he started a month earlier than Large and changed his mind in May. Both will find it tough to execute a 180-degree turn next month.
The two remaining obstacles to cheaper money in the UK are Governor Mervyn King and his deputy, Rachel Lomax. Because the composition of the panel has changed over the years, King is the only member who has had a say in every decision since the newly-elected Labour Government handed control of monetary policy to the bank in June 1997.
Before becoming governor two years ago, King had dissented from the majority vote a staggering 12 times - always taking a more hawkish line than his colleagues. On 10 occasions, he voted for higher borrowing costs when his peers favoured no change. Twice, the panel has sanctioned a reduction while King wanted to keep policy on hold.
At the monthly meeting, the governor casts the final vote. King has adopted the same custom as his predecessor, Sir Edward George, in always aligning himself with the majority. There is nothing in the statutes, however, to prevent the chief from being a nonconformist.
Charlie Bean, the BOE's chief economist, has voted to cut rates at the two most recent meetings, putting him at odds with his colleagues. Of the current rate-setters, Lambert, who has voted at 26 meetings, is the only one who always has been in agreement with the majority.
All of which puts Lambert effectively in charge of monetary policy at a time when the economy is giving mixed signals on the outlook for consumer spending and inflation. How Lambert decides to respond to that challenge is likely to be the key determinant of UK borrowing costs in coming months.
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