The survey consisted of an electronic questionnaire sent to 354 members of the SBE. 141 replies were received, a response rate of 40%.12 Over 85% of respondents said that forming a view of interest rate prospects was important to them. For those of us who have continually argued that the news on interest rates stems from developments in the economy rather than meetings of the MPC, it is heartening that, collectively, you place more weight on economic data than on MPC communications in forming a view of interest rate prospects. Respondents were asked to allocate a total of 100 points across the categories of information in terms of how useful they were in forming such a view. Twice as many points were given to economic data as to MPC communications, especially at the longer horizons – see chart 9. And the weight on data was divided roughly equally between financial data, official data on real activity, official figures for costs and  12  6  The full survey is to be published in the next issue of the SBE’s journal, the Business Economist. BIS Review 43/2007  prices, and business and consumer surveys. So the argument that the MPC responds to developments in the economy has been largely understood. This is welcome news for those of us who wish to be boring. So far I have talked only about the past – the performance of the UK economy and the behaviour of the MPC since 1997. What of the future? 3.
And it is why we place importance on the minutes of our monthly meetings and the quarterly Inflation Report to convey a full explanation of our thinking. Explaining our analysis at some length is a richer source of information for markets than code words or statements about the future path of interest rates. Less weight should be placed on the short  15  See my discussion of money and risk premia in King (2002b). BIS Review 43/2007  9  statements that are published with the announcements of our decisions because such statements, as we have seen elsewhere, run the risk of becoming monetary policy by code word. They do not help markets understand how we are likely to react to future data. A number of academics have suggested that the MPC publish forecasts for the path of Bank Rate. Several central banks now do so, noticeably the Reserve Bank of New Zealand, the Norges Bank and the Riksbank. Although there is some superficial attraction in such a move, there are four points that suggest the need for caution. First, what markets need more than anything is not an unconditional forecast of where interest rates might go, but an idea of our contingent response to data as they evolve. That is not easily communicated by a path – even when shown as a fan chart – for future interest rates. It requires a careful reading of the Inflation Report, the minutes of our monthly meetings and speeches by members of the MPC.