THE Engineering Employers' Federation wants changes in the way the Bank of England's Monetary Committee operates.

Mr David Gavan, Deputy Chief Executive of Bolton-based EEF Lancashire, said today: "EEF fully supports the independence of the Bank of England and the pursuit of price stability through setting interest rates in an open, transparent and credible manner.

"However, the current problems of an over-valued pound and a two-speed economy make its job more complicated."

An EEF report suggests:

Trim the number of MPC meetings a year from 12 to eight in order to reduce the danger of knee-jerk reactions and provide less opportunity for speculation in the media and markets.

Changing the MPC's target from the Retail Prices Index excluding mortgage interest payments to the Harmonised Index of Consumer Prices.

Appointing an additional, independent, non-academic economist to the MPC who has significant experience of working in industry.

Commissioning independent and detailed research into the possibility of incorporating the exchange rate and other asset prices into the current monetary policy framework.

Mr Gavan added: "While the MPC has performed well in the face of difficult circumstances, there is no reason to see its evolution as finished.

"It is important that monetary policy is aiming at the right target and the MPC has sufficient business insight and experience in its armoury."

The latest EEF survey of manufacturing trends shows a glimmer of confidence returning in sectors such as electronics and aerospace and in businesses not driven by European export markets.

But 21 per cent of the companies surveyed had reduced their labour force in the last quarter.