Analysis and evaluation practice of the monetary policy decision

There was a great interview on BBC Radio 4’s Today programme this morning, about whether the MPC should respond to persistently above-target inflation by raising base rate.

Two former MPC members Professor Charles Goodhart and Willem Buiter debated whether the Bank of England should increase interest rates, and the interview gives a great opportunity for students to practise their skills of analysis and evaluation.

• Play the interview, and as they are listening they should list the arguments given for and against a rise.
• Then each should select their two ‘favourites’ of the reasons given for each side of the argument and write a paragraph which starts as follows:

“The Monetary Policy Committee should now decide to RAISE/HOLD interest rates because….”

They then complete a paragraph, following the WEESTEPS evaluation technique, which has to refer to each of their 2 arguments for and 2 arguments against increasing rates, using data and making reference to the real economy, fully explaining every aspect of policy and theory that they are using, and concluding with justification for what they consider to be the over-riding argument.