So, most people see the interest rate headline, you know, whether it goes up, it comes down, or stays the same. But what goes on behind the scenes with the Monetary Policy Committee members?
An awful lot of talking and an awful lot of thinking. I mean, our staff do a huge amount of work to prepare. The rounds, they go on for a week or so. So, basically, we alternate between a one round where we produce the Monetary Policy Report as well. So, that takes longer because it's got a forecast. So, we're probably at that as a committee for about two weeks.
Staff are at it for a lot longer. And then, the intervening rounds, we actually don't do the reports and the forecast. So, that probably takes about a week of meetings. So, yeah, there's a lot of work goes on.
And when it comes to that decision, so do you make the decision on the day? Like, all nine of you basically stand up and like hold a paddle saying you're voting for or against?
No. So, actually, that used to be the case. But these days, we publish the minutes at the same time as the decision. And so, the pure practicalities of doing that mean that we obviously have to spend some time preparing the minutes. The staff do the first version, the committee looks over them. So, actually, we do the voting in two rounds, actually. We do what we call an indicative vote. So, we publish the decision on Thursday, 12:00 on Thursday. So, we do the indicative vote either on the previous Friday or the Monday. The reason we vary it is that in some rounds, we have data releases coming out, like inflation numbers and labor market numbers coming out during the week before the decision.
That's the only time that we actually see numbers in advance of them coming out. But we only see them on Monday morning. So, when that's the case, we do the indicative vote on Monday. Otherwise, we do it on Friday, because that then gives the staff a chance to write the minutes, because they've got to know what we're going to do before they can write the minutes. And then we do the final vote on Wednesday afternoon, early Wednesday afternoon. And then we finish the minutes on Wednesday afternoon. And then it's all done. So, I know this idea that Thursday morning we must be absolutely hard at it. We actually don't meet on Thursday morning. I'm usually preparing for the sort of...
I'm not sure it's relaxed, actually. I wouldn't say that. I'm usually preparing for the press conference or something.
Yeah, of course. So much of what drives inflation is things like obviously what's been happening in the Middle East, the energy prices, global events. These are completely outside of your control. So, what is it like being a person that people look to for answers to when you actually can't control any of these causes?
Well, that's a really interesting question because you're right. You know, one of the things I have to sort of say is, I'm sorry we can't predict unpredictable events, as it were. So, you know, sadly, if you look at the conflicts in the Middle East that broke out in February, yeah, we can't predict it. We can't predict COVID breaking out. You know, we have to respond to those things. So, our job is obviously to respond to things. Now, of course, some of the things that drive monetary policy we can see evolving over time. So, those things obviously, yeah, we follow very closely and we do respond, obviously. But, you know, unfortunately, and there've been more of them recently, we do get these sort of unpredictable events usually in the world somewhere. I mean, obviously the Ukraine war was a very big one as well. And then, you know, our job is to respond to them. We can't stop them happening, as you say.
Wish we could, but we can't.
Yeah, of course. Does it ever feel quite difficult to feel like you're explaining something that you can't control, but you're now having to make uncomfortable conversations or make difficult decisions about having to make and explain?
Yes, yes, it is. I mean, it's our job to do it. It can get a bit frustrating at times, I'd say. One of the best examples was actually after the Ukraine war broke out, because that had a big effect on energy and food prices, which are really the most salient. You know, they're the things that people notice most for obvious reasons. And there was an article, I won't name the newspaper, but it was an article saying, 'Bailey blames Putin.' As if, you know, I should take responsibility. Well, and I say, 'Yeah, I actually am blaming you.'
[laughter] Yeah, no, you're fair enough. AI is a huge conversation at the moment, especially after the ripple impacts last week. So, obviously, we're learning more about the risks of AI to jobs, to the economy, especially for young people. Like, from where you sit, what are the biggest financial risks that AI poses to the everyday person?
Well, yes. I mean, first of all, I would say, you know, we are spending a lot of our time on AI, and that's right that we should do. Now, first of all, let me say, it is a big opportunity. You know, it's the next big technological advance, well, probably with robots, actually. And actually, probably the two of them together, I think, will also be important. So, you know, it's an opportunity. I think when we're looking at where's the economy going to get growth from, that's the source. But as you rightly say, it's bringing a lot of issues and a lot of risks with it. I think those to me go back to the really fundamental points that, you know, there's a real question about how much control, you know, we as humans and a society should have over it, and how you exercise that control, because it has really, I mean, it's gone on this year in ways that even the people who are developing it will tell you they were not expecting.
Well, because also, with AI right now, obviously, we're talking about the UK. You're the governor of the Bank of England. But obviously, our markets in the UK aren't really that AI-linked versus those in the US.
Yes, that's true. Yes. Yeah. Yes. Yeah.
How do you, like, do you kind of closely monitor, like, what obviously the Fed are doing because of the ripple impacts on the UK population?
Well, we do. And we obviously follow very closely the markets because you're right that there's more of the impact being seen in the US. You know, the valuations of AI companies, you know, have grown very strongly on the basis of what people believe it can deliver.
And what they can deliver. And that's reasonable, I mean, to say, but it is obviously having to take a view on the future. Now, you know, I think there will be growth. But the question of how much and what it will do for the valuations of these companies and therefore for the value of people's investments is a really good one. And even if, let's assume, and you say AI will contribute to growth, it may still be the case that markets have overestimated, and that could be because they've got to obviously value how much of it's going to come, what its contribution is going to be, how quickly it's going to come through. I mean, if you go back in history, it took a lot longer, say, for electricity to contribute to economic growth than people thought it would. And the final thing, because you look at the moment, every company is priced to be a winner. Actually, again, if you look at history...
That doesn't usually turn out to be the case. I always give the credit...
We all think, yeah, we almost always when we think about searching the internet just refer to Google.
But we forget that the original internet search company was Netscape. It was not Google. But Netscape doesn't exist anymore. You know, it got ahead initially and then it fell behind and it no longer exists. So, you know, things can change.
Sorry, so this is off topic, but so obviously I teach finance in schools and I do this thing where I get them to, like, point out all the key people in the institutions, and they can often point out the prime minister, they can sort of point out the chancellor, but sometimes they do struggle...
...the governor of the Bank of England. And I think it's because young people especially aren't aware of the impact that your great decisions make on them.
And I'd love to hear from you how you would convey that to the next generation of how important, well, not necessarily how important you are in their specific lives, but how important the decisions you and your monetary policy committee members make on the next generation, basically.
Well, I think first of all, I mean, I'm not elected. So, I think, you know, it's important we stay in our lane, as it were, in that sense. I mean, you know, I'm not trying to compete with the Prime Minister and the Chancellor. They've got very big and important jobs.
