LONDON (MNI) – Ben Braodbent, the most recent appointment to the
Bank of England’s Monetary Policy Committee, appeared before the
Treasury Select Committee Tuesday

The full text of Broadbent’s appointment hearing statement follows:
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Questionnaire in advance of Treasury Committee hearing
Ben Broadbent

A. PERSONAL AND PROFESSIONAL BACKGROUND

1. Do you have any business or financial connections or other
commitments which might give rise to a conflict of interest in
carrying out your duties as a member of the MPC?

No

2. Do you intend to serve out the full term for which you have been
appointed?

Yes

3. Please explain how your experience to date has equipped you to fulfil
your responsibilities as a member of the MPC? In particular, what
areas of the MPC’s work do you believe you will make a particular
contribution to, and which will you have to undertake additional
research into upon your arrival?

I have spent most of the past 10 years as a specialist in the UK
economy. This has involved regular conjunctural research pieces,
ahead of the MPC’s Inflation Report. I have also undertaken more
detailed analyses of (amongst other things) the interactions between
consumption and debt, fair value models of housing and their
consequences for household balance sheets, the labour market and the
state of the banks.

Prior to joining Goldman Sachs I completed a PhD at Harvard and
taught macro and monetary economics at Columbia University. I believe
that my experience in the financial sector has helped provide
insights into the financial crisis, including its implications for
policy. With the help of the Banks staff, and that of my new
colleagues on the MPC, I hope to improve my understanding of many
areas of the economy.

4. Which of your publications or papers are of most relevance to your
future work on the MPC?

I have included on my CV a selection of papers from my last job.
Most of this is relevant for monetary policy, directly or indirectly.
If there is any interest Id be happy to provide the Committee with
copies.

B. ACCOUNTABILITY

5. How important do you think it is for MPC members to be subject to ex
post parliamentary accountability? What are the strongest and weakest
parts of the current procedures in the UK?

It is very important. The MPC has been granted operational
independence over monetary policy. But it serves the public interest and
accountability to the public via both the open letter procedure and
testimony to the Treasury Committee is therefore crucial for its
authority and legitimacy. The open-ness afforded by these appearances,
and by the publication of monthly minutes, I regard as a clear strength
of the UKs current procedures. As for the weaknesses, I would prefer to
reserve judgment till after some time on the inside.

6. If you were to make yourself available for reappointment to the MPC at the end of your term,
what criteria should be used to assess your individual record as an MPC member?

I should be judged by my voting record (subject to the information
available at the time) and my ability to add positively to the MPCs
deliberations.

7. Do you believe there is merit in having an individual paragraph in the minutes of MPC
decisions in which to explain your most recent vote?

Im not sure what that would add. Members dissenting from the majority are already given adequate
space in the minutes in which to explain their vote. There are also other settings speeches and
appearances before this Committee, for example in which individual MPC members can explain
their views in more depth.

8. Do you think the Treasury Committee should have a veto on MPC appointments?

That is a matter for Parliament, not the MPC

C. OTHER PROFESSIONAL ACTIVITIES

9. What other professional activities do you expect to continue/
undertake in addition to your position on the MPC and how do you
intend reconciling these activities with your position as a MPC
member?

I intend to pursue a graduate teaching job, in macroeconomics, in
London. I will ensure that my lectures do not convey anything specific
about my views of current monetary policy in the UK. I am also a member
of the newly-constituted Advisory Panel of the Office for Budget
Responsibility. 10. Outside of MPC meetings, what activities do you
intend undertaking in order to add to the publics understanding of the
role and decisions of the MPC?

In common with other MPC members, I intend to give regular speeches
and make regular visits to businesses with the Bank’s regional Agents.

D. MONETARY AND ECONOMIC POLICY

11. What do you regard as the major risks to the outlook for the UK
economy?

The household saving rate is still below levels reached after past
recessions. A sudden rise would weaken consumer spending.By draining
income and spending power from the UK, higher commodity prices threaten
to do the same. To the extent people try to recoup these losses through
higher wages, however, rises in commodity prices may also have
persistent effects on domestic inflation, beyond their first-round
impact on the CPI.

Finally, and although these are smaller than they once were, there
are still risks to funding costs from stresses in financial markets,
whether at home or among our trading partners in Europe. An exacerbation
of these stresses would further restrain the supply of retail credit and
the economic activity dependent on it. There are, to varying degrees,
opposite risks for all these factors. Commodity prices can fall as well
as rise. As and when banks balance sheets are deemed to have improved
the process of deleveraging is likely to begin to slow.

12. What consideration should be given to the exchange rate and to asset
prices, including house prices, within the framework for inflation
targeting? In particular, how should monetary policy react to asset
price bubbles?

In an inflation targeting framework, monetary policy should and
already does respond to changes in asset prices, at least to the
extent they affect demand or signal a change in inflation expectations
(and thereby the distribution of future inflation). I am sceptical,
however, that policymakers should aim to do much more than this, for
three reasons. First, there is a great virtue in having only one
declared target. Credibility owes something to simplicity, and you risk
compromising that simplicity if you introduce multiple objectives.
Second, if the point of reacting to asset prices directly (above and
beyond their impact on inflation) is to limit risks to the domestic
financial system, its worth recognising that many of those risks
emanate from abroad. Arguably, for example, the excessive growth in UK
banks balance sheets in the middle of the last decade owed much more to
the strength of global asset prices (including those of US residential
housing and fixed-income assets everywhere) than to anything specific to
the UK. Yet domestic policy alone cannot affect these trends. Third, to
the extent that financial risks do have a domestic origin, it seems
likely that other policy instruments including, potentially, those to
be employed by the Financial Policy Committee would be much better
suited to controlling them.

–London newsroom: 00 44 20 7634 1655; e-ml: ukeditorial@marketnews.com

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