Examination of Witness (Questions 1 -
WEDNESDAY 22 MAY 2002
1. Good afternoon. Can I welcome the first witness,
Ms Marian Bell. Welcome to the Committee and congratulations on
your appointment. For the sake of the shorthand writer could you
identify yourself, please, give your name and your title.
(Ms Bell) My name is Marian Bell. I am
the new appointee to the Monetary Policy Committee.
2. Is this your first appearance before a Select
(Ms Bell) It is, yes.
3. I do not think there is any reason to worry,
we hope to put you at ease. Could I ask you to tell us how you
were appointed to the MPC. When did the appointment process begin
and what did it entail?
(Ms Bell) It entailed being asked to go along to the
Treasury and asked if I would be happy to serve on the MPC. I
then had to consider the matter for a little while and then I
4. Why did you accept the job?
(Ms Bell) For me it is a tremendously exciting and
challenging job. I have spent a lot of time in the past looking
at monetary policy. I think it is an extremely worthwhile job
and a job where I think I have something to offer, so I did not
have to consider for very long.
5. I notice from your CV that you are still
working as an economic consultant, that you will be working only
three days a week and you will still be working with some clients.
Is there not a perceived conflict of interest there?
(Ms Bell) If that is what is in the CV you were sent,
I apologise. I ceased my consultancy business immediately upon
my appointment, so there is not a conflict of interest at all.
6. So you will be working full-time?
(Ms Bell) I will be working part-time for the MPC
but that does not mean I am working for anybody else, I will be
looking after my children in the remaining days.
7. So you will not have interests other than
(Ms Bell) That is correct.
8. You were a member of the Sunday Business
"Real World MPC" for some two and a half years. What
sort of world do you feel the official MPC was in in that period?
(Ms Bell) It was not my title for it I should point
out. I think the MPC was very much in the real world. Sunday
Business wanted to create a body that had perhaps a bit more
9. There is a perception that business will
quite often want a slightly different interest rate policy from
other sectors of the economy. Do you think that is true, that
the Sunday Business panel highlighted the manufacturing
(Ms Bell) I think if you go back on the voting records
there was a disparity between different sectors of the economy
and where they wanted interest rates to be but the real MPC, as
opposed to the "Real World MPC", has a very clear remit,
which is inflation, and they have to set interest rates for the
whole economy and not for any particular interest group.
10. One more question specifically on the voting
record. Unlike most of the "Real World MPC" you were
somewhat more inclined to support higher interest rates than the
official MPC in 1999 and more recently you have gone somewhat
lower than the official MPC. Do you want to comment on the reasons
for this change of stance?
(Ms Bell) I do not think it is a change of stance
in the sense that it was a change of view as to what was important.
I had the view in 1999 that perhaps rates were being cut too fast
by the MPC and I would have taken a more cautious approach. I
think what actually happened was that we had a trough of rates
that only persisted for a very few months in 1999 in the event.
After that I think my voting was pretty much in line in terms
of the increase.
11. More recently I think you have tended to
go slightly lower than the official MPC.
(Ms Bell) Yes, just in the last few
12. Is that because you feel they have been
a little too cautious perhaps?
(Ms Bell) The "Real World MPC" ceased operating
in March 2001 so we were in the cycle then of raising rates, not
in the current conjuncture, and my voting showed that I would
have just been a bit more cautious and perhaps slower in the rate
rises at that time.
Dr Palmer: Thank you.
13. Ms Bell, you were the Reuters' Interest
Rate Forecaster of the Year in 1999.
(Ms Bell) Yes.
14. So perhaps we can get the benefit of some
of your forecasting now. Where do you think that the official
interest rate will be for the UK at the end of this year?
(Ms Bell) I think that is something that the MPC will
have to judge month by month as we go through the year where the
appropriate level of interest rates will be.
15. But what is your view as a potential MPC
member? You will have your own views, you will be contributing
to this process. It is not that confidential because they publish
the Minutes which show how people voted anyway which show that
there are differences, so what is your forecast now?
(Ms Bell) You will see the Minutes once I begin my
voting and see how I voted.
16. Gosh, you are qualified to deal with this
already. Would you describe yourself as a hawk or a dove to save
time for all those analysts who have got to stereotype you?
(Ms Bell) I see that in the press I have been described
as both so far. I have to say I do not find the label frightfully
helpful if it means that you have a predisposition to always voting
one way. I think, as your colleague has just pointed out, I was
either side of the MPC in my views over the short life of the
Sunday Business "Real World MPC".
17. Actually looking at the voting record from
December 1998 to March 2001 it suggests that you have been very
much in line with the MPC over that period.
(Ms Bell) I think there were some timing differences.
I think you would probably have to look at a different time period
to see more considerable differences between myself and the MPC.
18. You will be aware that there has been this
debate within the MPC recently about the level of the exchange
rate and the extent to which that should be taken into account
in setting the interest rates now and some people like Mervyn
King have been on one extreme saying there may at some stage be
a big fall and we should be worried about that and take that into
account now and people like Sushil Wadhwani saying we must not
worry about that and that has been raised in the debate within
the MPC. Which camp would you say that you are in on that debate?
(Ms Bell) As to whether I think there will be a fall
19. If you look at the MPC Minutes from February
2002 they say "Some members placed weight on the upside risks
to the inflation outlook . . ." because of the possibility
that at some stage the exchange rate is going to take a big dive.
Others were not so worried about that and did not think the effects
would be that great and did not think that we should be worrying
about such matters before they happened, so in other words they
wanted rates to be lower whereas the other people were more worried
about the risks. Which camp are you in?
(Ms Bell) I am of the view that you should not prejudge
it, that you should not move interest rates on a forecast of where
the exchange rate might go. I think all economists will tell you
that it is not very easy to forecast exchange rates and the MPC
has been worried about an imminent fall in the exchange rate ever
since its inception and we have not had it yet. I think to set
rates on the expectation of the fall would not be right. You then
ask what would happen if there was a fall. I have to say I can
see both arguments and I think the MPC would have to monitor very
carefully how that was feeding through into inflation and a lot
would depend on what was happening to overall demand in the economy
at the same time.