The committee said the MPC had consistently over-estimated future inflation pressures until 2002 and under-estimated them since.
Lord Preston, the committee chairman, said this week:
“The persistence of inflation below target and the continued absence of strong demand factors in inflation are evidence that interest rates have been kept too high.”
The committee also criticised Chancellor Gordon Brown’s decision to switch the Bank’s inflation target from 2.5 per cent on the RPIX measure to 2 per cent on the new Consumer Price Index (CPI).
The report concluded that the Chancellor should revert to his previous practice of appointing external members of the MPC with acknowledged expertise in monetary economics.
Ray Boulger, senior technical manager at Charcol, said: “With hindsight the MPC would probably see that the Lords’ comments are true.
“The MPC has done a good job in staying within the Chancellor’s inflation target but it may have been over cautious.”
Martin Ellis, chief economist at Halifax, commented: “I’m not sure how much the MPC would be swayed by these comments. It is still too soon to rule out any further rate rises but we are probably at the peak.”
Boulger agreed that the switch to the CPI was not appropriate as it is less representative of what is happening in the UK and more to do with the economy in the euro-zone.
