IN RECENT years Britain has experimented with extraordinary monetary stimulus. With the onset of the financial crisis in 2008-09, the monetary-policy committee (MPC) of the Bank of England slashed the base rate of interest to 0.5%. After the Brexit vote of June 2016 it cut again, to 0.25%, the lowest in the Old Lady’s 324-year history.

Lately, however, the bank has taken a hawkish turn. In November the MPC reversed the post-Brexit cut. At the beginning of this year it allowed a scheme which channelled cheap funding to banks to lapse. On May 10th the MPC could raise interest rates above 0.5% for the first time in a decade. If not, it is expected to act soon. Members of the MPC are making hawkish noises; traders believe that a rate rise before the end of the year is highly likely.

A few factors explain the change in the MPC’s outlook. The bank’s mandate is to hit a 2% inflation target. Consumer-price inflation has exceeded that rate since February 2017. By increasing the bank rate, the MPC would make it costlier to borrow and more rewarding to save, reducing demand and bringing inflation back down.

Yet on closer inspection, the case for tighter monetary policy looks thin. Above-target inflation was caused by the Brexit-related depreciation of sterling, which raised the cost of imports. The impact of that depreciation is fast falling out of the figures. If the recent relationship between movements in sterling and changes in consumer prices continues to hold, then by the end of the year inflation will be back on target.

The hawks counter that they are less concerned about sterling-related inflation than they are about the domestically generated sort. Lately economists have lowered their estimates of the economy’s trend rate of productivity growth. Increasingly the MPC shares the pessimists’ view. It believes that Britain’s productive capacity can grow at only around 1.5% a year. This ultra-low “speed limit”, as Mark Carney, the bank’s governor, calls it, has big implications for monetary policy. If GDP growth exceeds 1.5%, it suggests that the economy is overheating. The remedy would be tighter monetary policy.

Some evidence suggests that the economy has been running hot. From the Brexit referendum to the end of 2017, GDP grew at an annual rate of about 1.8%. In the first quarter of 2018 it slowed almost to a standstill. That in part reflects one-off factors such as fallout from the collapse of Carillion, an outsourcing firm, in January, and bad weather in March. The underlying growth rate may be stronger.

But the MPC’s view of the economy’s potential may be too gloomy. In the second half of 2017 productivity grew at an annual rate of 3.4%, the fastest since 2005. And there is little evidence of domestically generated inflation. Nominal wage growth remains below 3% a year, which is measly by historical standards. Inflation in the service sector, largely generated by domestic activity because fewer services than goods are traded, is low and has been falling.

The economy will need tighter monetary policy at some point. If unemployment continues to fall, wage growth may strengthen. A clear post-Brexit settlement could gee up economic activity. For now, though, the MPC should bide its time.