An influential group of peers have called into question the chancellor's management of the monetary policy committee.

In a new report released on Thursday the Lords economic affairs committee said the Treasury had "not fully thought through" a change in the measurement of inflation used by the Bank of England.

The report on the work of the MPC also accused the independent interest rate setting body of keeping the cost of borrowing too high and miscalculating the growth of prices.

And Gordon Brown was criticised for failing to appoint specialist monetary policy economists to the committee in his recent choices.

The MPC was established by Brown in 1997 as a means of the Bank controlling interest rate decisions, rather than doing so in conjunction with politicians.

However the chancellor continues to appoint external members of the group and set the inflation target and measure of prices growth.

The peers welcomed the innovation of the committee and praised Brown's record on the economy.

Concern

But the report expressed concern that his control of fiscal policy was not being matched by the MPC's inflation management.

"The MPC is a real success story," committee chairman Lord Peston said. "But there are a number of steps that should be taken, by the chancellor and by the MPC itself, to strengthen it further.

"On fiscal policy, we think that the present policy framework is close to best practice and that the chancellor's golden rule is a useful rule-of-thumb.

"However, the persistence of inflation below target and the continued apparent absence of strong demand factors in inflation are evidence that interest rates have been kept too high."

The report also challenged the chancellor's decision to change the measure of inflation from the Retail Prices Index to the Consumer Price Index in order to fall in line with Europe.

"We have some concerns about the chancellor's decision to change the MPC's operational target - now based on the Consumer Prices Index - and are not convinced that the change was properly thought through," the peers said.

They claimed the move could have a significant impact on monetary policy if, as the Treasury has acknowledged they could, the two measures begin to diverge.

And while the report acknowledged that Brown's appointments to the MPC were all esteemed economists, it queried why none his recent choices were monetary policy experts.

"As a result the MPC may suffer a loss of credibility, especially when tough decisions are required," it said.