David Blanchflower joined the MPC in June 2006, when money and credit growth were booming. The last move in official rates had been a cut (in August 2005). Blanchflower opposed the quarter-point rises in August 2006, November 2006 and January 2007. In March 2007, he voted for a cut. Had his view prevailed, the credit bubble would have been larger and its subsequent bursting even more destructive.

Bizarrely, in May 2007 Blanchflower joined the MPC majority in voting for a fourth quarter-point rise, implicitly accepting that his opposition to the previous 75 bp increase had been misguided.

Blanchflower resumed his calls for lower rates from October 2007, voting for a reduction at every meeting since then. The MPC did cut in quarter-point moves in December 2007, February 2008 and April 2008. These declines arguably had little effect because the monetary transmission mechanism was broken.

Blanchflower apparently wishes the MPC had emulated the Fed's rate-slashing, although it is debatable whether this has helped either the economy or financial markets. The main impact was to push the dollar lower, contributing to soaring commodity prices and higher inflation. The inflation spike squeezed real incomes and was partly responsible for the 3.1% annualised decline in US consumer spending in the third quarter.

Rising inflation has also been a major economic drag in the UK. Earlier large rate cuts would probably have caused an even greater plunge in the sterling exchange rate and a higher inflation peak.

A large cut is now warranted because 1) inflationary pressures have eased, 2) rates are being reduced in other economies, limiting the risk of a further plunge in sterling and 3) the recent support package for the banks increases the chances that policy easing will be transmitted to borrowers.

Blanchflower's opposition to higher rates in 2006-07 was harmful. He was prescient in forecasting that the financial crisis would lead to major economic weakness but this does not imply that earlier large rate cuts were the correct policy prescription.