Skip to main content
  • This website sets cookies on your device. To find out more about how we use cookies please refer to our Privacy and Cookie Policy. By continuing to use the site, we’ll assume that you are content for us to set these on your device.
  • Close
Home > News and Publications > Monetary Policy

Monetary Policy

2012 Q4
The Funding for Lending Scheme (127KB)
By Rohan Churm and Amar Radia of the Bank’s Monetary Assessment and Strategy Division, Jeremy Leake of the Bank’s Financial Institutions Division, Sylaja Srinivasan of the Bank’s Statistics and Regulatory Data Division and Richard Whisker of the Bank’s Sterling Markets Division.
The Bank of England and HM Treasury launched the Funding for Lending Scheme (FLS) in order to encourage lending to households and companies.  The FLS offers funding to banks and building societies for an extended period.  And it encourages them to supply more credit by making more and cheaper funding available if they lend more.  Easier access to bank credit should boost consumption and investment by households and businesses.  In turn, increased economic activity should raise incomes.  Early signs have been encouraging, as funding costs for UK banks have fallen sharply.  But it will be some time before the impact of the FLS on lending is clear.  The Bank is monitoring a range of indicators in order to assess the direct and indirect impacts of the Scheme.

What can the money data tell us about the impact of QE? (486KB)
By Nicholas Butt, Sílvia Domit, Michael McLeay and Ryland Thomas of the Bank’s Monetary Assessment and Strategy Division and Lewis Kirkham of the Bank’s Statistics and Regulatory Data Division.
This article reviews the main influences on broad money growth since the onset of the global crisis, focusing on the impact of the Monetary Policy Committee’s asset purchase programme (QE).  The underlying weakness in money growth is likely to have reflected a combination of reduced nominal demand and a restructuring of banks’ balance sheets.  QE has played a key role in offsetting some of this weakness and in a way that has not depended on an increase in bank lending.  The first two rounds of QE seem to have had a similar proportionate impact on the money supply, but there is some evidence that the transmission mechanism of QE may have been different over the two episodes.

2012 Q3
The distributional effects of asset purchases (172KB)
In its report on the 2012 Budget, the Treasury Committee highlighted the redistributive impact of monetary policy, and asked the Bank, and MPC members in particular, to improve their efforts to explain the costs and benefits of their policy actions to groups that are perceived to have been particularly badly affected.  This report forms part of the Bank’s response.

2012 Q2
How has the risk to inflation from inflation expectations evolved? (101KB)
By Rashmi Harimohan of the Bank’s Monetary Assessment and Strategy Division.
During 2011, the Monetary Policy Committee expressed concern that persistently
above-target outturns of CPI inflation might lead to inflation expectations becoming less well anchored by monetary policy.  And in turn, that could make inflation itself more persistent via changes in price-setting or wage-setting behaviour.  But inflation is now more than 2 percentage points lower than in September 2011.  In light of that, this article discusses recent movements in inflation expectations and looks at a range of indicators to assess how the risk to inflation from expectations has evolved.  While the upside risk has receded a little relative to the 2010–11 H1 period, so long as inflation is above target, some risk remains.

Using changes in auction maturity sectors to help identify the impact of QE on gilt yields (77KB)
By Ryan Banerjee, David Latto and Nick McLaren of the Bank’s Macro Financial Analysis Division and Sebastiano Daros of the Bank’s Sterling Markets Division.
Using the information contained in economic news and data releases, financial markets have widely anticipated recent Monetary Policy Committee announcements about the amount of assets the Bank of England intends to purchase as part of its quantitative easing (QE) policy.  This makes it increasingly difficult to identify the impact of QE on gilt yields.  This article uses three ‘natural experiments’ associated with operational changes to the distribution of gilt purchases — in March 2009, August 2009 and February 2012 — to help overcome this identification problem.  It finds that the ‘local supply’ channel, which can be identified using these events, can explain around half of the total impact of QE on gilt yields.  The estimates of this effect are broadly similar across the three events;  so the strength of this channel of QE does not appear to have changed significantly since gilt purchases were introduced in early 2009.

2012 Q1
Quantitative easing and other unconventional monetary policies:  Bank of England conference summary (94KB)
By Michael Joyce of the Bank’s Macro Financial Analysis Division.
In November 2011, the Bank of England held a conference to discuss the lessons learned about quantitative easing and the other unconventional monetary policies used during the global financial crisis.  A number of central bank economists and academics presented their research.  This article summarises the presentations made at the conference and some of the related discussions.  Overall, the research presented broadly supported the emerging consensus that unconventional monetary policies helped to mitigate the macroeconomic effects of the crisis.  But there was less agreement about the magnitude of the effects and the main mechanisms through which the policies may have worked, and a number of areas for further research were suggested.

2011 Q3
The United Kingdom’s quantitative easing policy:  design, operation and impact
By Michael Joyce, Matthew Tong and Robert Woods of the Bank’s Macro Financial Analysis Division.
In response to the intensification of the financial crisis in Autumn 2008, the Bank of England, in common with other central banks, loosened monetary policy using both conventional and unconventional policy measures.  In the United Kingdom, the principal element of these unconventional measures was the policy of asset purchases financed by central bank money, so-called quantitative easing (QE).  Over the period March 2009 to January 2010, £200 billion of assets were purchased, overwhelmingly made up of government securities, representing around 14% of annual GDP.  This article reviews the motivation for these central bank asset purchases and describes how they were implemented.  It goes on to review a range of evidence for the impact of the asset purchases made to date, both on financial markets and more widely on the economy.  While there is considerable uncertainty about the magnitudes, the evidence suggests that QE asset purchases have had economically significant effects.

2011 Q2
Assessing the risk to inflation from inflation expectations (118KB)
By Clare Macallan and Tim Taylor of the Bank’s Monetary Assessment and Strategy Division and Tom O’Grady of the Bank’s Structural Economic Analysis Division.
Inflation expectations play an important role in the transmission mechanism of monetary policy. There is a risk that the periods of above-target CPI inflation in the past three years might cause inflation expectations to drift upwards. That might make inflation itself more persistent, via changes in price and wage-setting behaviour. And so, other things being equal, returning inflation to target would require tighter monetary policy. This article provides a framework that can be used to monitor the risk to inflation from inflation expectations. While recent developments provide few signs that the risk is materialising, the imperfect nature of data mean that the risk can be assessed only imperfectly.

2011 Q1
Understanding the recent weakness in broad money growth (120KB)
By Jonathan Bridges, Neil Rossiter and Ryland Thomas of the Bank’s Monetary Assessment and Strategy Division.
The growth of broad money in the UK economy has slowed dramatically since the start of the recession. In part, that weakness reflects reduced borrowing by households and companies during the recession. But money balances held by asset managers also fell as deposits were used to purchase new equity and long-term debt issued by the banking sector in response to the financial crisis. Offsetting the weakness from these two factors was the programme of asset purchases — so-called ‘quantitative easing’ or QE — conducted by the Bank of England on behalf of the Monetary Policy Committee, which boosted broad money holdings. The evidence from the monetary data suggests that the programme of asset purchases contributed to an increase in asset prices and, ultimately, an increase in nominal demand in the economy, corroborating other evidence from financial market prices.

Monetary Policy Roundtable (35KB)
On 14 December 2010, the Bank of England and the Centre for Economic Policy Research hosted the fifth Monetary Policy Roundtable. These events are intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. As always, participants included a range of economists from private sector financial institutions, academia and public sector bodies. At this fifth Roundtable there were two discussion topics: how different will this recovery be?; and how fast can the economy grow without hitting capacity constraints?

2010 Q4
The Bank's money market framework (84KB)
By Roger Clews, Chris Salmon and Olaf Weeken
The Bank of England implements the policy stance of the Monetary Policy Committee through its operations in the sterling money markets. It also uses these operations to reduce the costs of disruption to the liquidity and payment services supplied by banks. In order to ensure their continued effectiveness, it was necessary to adapt the framework for these operations in response to the significant changes to financial and monetary conditions that occurred during the recent financial crisis. This article describes how central banks can use their money market operations to implement monetary policy and provide liquidity support to banks and some of the issues that can arise when undertaking operations to achieve these two objectives. The article goes on to explain the Bank's choices about its own operating framework, including how its thinking has been influenced by the lessons learned during the financial crisis.

2010 Q3
Monetary Policy Roundtable (38KB)
On 14 July, the Bank of England and the Centre for Economic Policy Research hosted the fourth Monetary Policy Roundtable. These events are intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. As always, participants included a range of economists from private sector financial institutions, academia and public sector bodies.  At this fourth Roundtable there were four discussion topics: what have we learnt about inflation dynamics? quantifying the effects of quantitative easing; global prospects and the impact on the UK economy; and monetary and fiscal policy.

2010 Q1
The Bank's balance sheet during the crisis (421KB)
By Michael Cross, Paul Fisher and Olaf Weeken
This article sets out how monetary policy implementation and liquidity provision during the financial crisis have affected the size and composition of the Bank of England's balance sheet. It extends and updates a recent speech by Paul Fisher, Executive Director Markets, and describes the main components of the Bank's balance sheet prior to and during the crisis.

Monetary Policy Roundtable (262KB)
On 15 December, the Bank of England and the Centre for Economic Policy Research hosted the third Monetary Policy Roundtable. These events are intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. As always, participants included a range of economists from private sector financial institutions, academia and public sector bodies. At this third Roundtable there were two discussion topics: monetary policy and the current conjuncture; and the recession and the UK labour market. This report summarises the main points made by participants at the Roundtable.

2009 Q3
Monetary Policy Roundtable (218KB)
On 8 June, the Bank of England and the Centre for Economic Policy Research jointly hosted a Monetary Policy Roundtable. This was the second in a regular series intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. Participants included a range of economists from private sector financial institutions, academia and public sector bodies. There were four discussion topics: monetary policy and the current conjuncture; quantitative easing; sterling and capital flows; and lessons from monetary history for the current policy challenges. This report summarises the main points made by participants at the Roundtable.

2009 Q2
Quantitative easing (378KB)
By James Benford, Stuart Berry, Kalin Nikolov and Chris Young
The Monetary Policy Committee's recent decision to expand the money supply through large-scale asset purchases (or 'quantitative easing') shifted the focus of monetary policy towards the quantity of money as well as the price of money. With Bank Rate close to zero, asset purchases should provide an additional stimulus to nominal spending and so help meet the inflation target. This should come about through their impact on asset prices, expectations and the availability of credit. However, there is considerable uncertainty about the strength and pace with which these effects will feed through. That will depend in part on what sellers do with the money they receive in exchange for the assets they sell to the Bank of England and the response of banks to the additional liquidity they obtain. The MPC will be monitoring a range of indicators in order to assess the impact of its asset purchases and therefore judge the appropriate stance of monetary policy.

2009 Q2
The economics and estimation of negative equity (432KB)
By Tomas Hellebrandt, Sandhya Kawar and Matt Waldron
Negative equity occurs when the market value of a house is below the outstanding mortgage secured on it. As house prices fall, the number of households in negative equity tends to rise. Between the Autumn of 2007 and the Spring of 2009, nominal house prices fell by around 20% in the United Kingdom . There are no data which accurately measure the scale of negative equity. Three estimates presented in this article suggest that around 7%-11% of UK owner-occupier mortgagors were in negative equity in the Spring of 2009, although for most of those households, the total value of negative equity was relatively small. The effects of negative equity can be painful for those households concerned. Negative equity can also have implications for both monetary policy and financial stability, which are discussed in this article. These effects are likely to depend on developments elsewhere in the macroeconomy and financial system.

2008 Q4
Price-setting behaviour in the United Kingdom (520KB)
By Jennifer Greenslade and Miles Parker
It is important for central banks to understand how companies set prices, since price-setting behaviour plays a key role in the monetary policy transmission mechanism. Surveys of companies have been conducted in a variety of countries to shed light on this issue. Earlier this year the Bank of England asked companies who are contacts of the Bank's Agents about how they set prices. The survey adds to and updates our understanding. It indicates that the frequency with which companies change their prices varies considerably across sectors but that over the past decade a significant number have increased the frequency of price changes. Different factors influence price rises and falls but nearly half of companies change their prices within three months of an increase in costs or a fall in demand.

2008 Q4
Monetary Policy Roundtable (224KB)
On 30 September, the Bank of England and the Centre for Economic Policy Research jointly hosted a Monetary Policy Roundtable. This was the first in what is expected to become a regular series intended to provide a forum for economists to discuss key issues affecting the design and operation of monetary policy in the United Kingdom. There were four discussion topics: the prospects for the housing market and consumer spending; oil and other global price pressures; monetary policy considerations at the current juncture; and lessons from the financial turmoil for monetary policy. This report summarises the main points made by participants at the Roundtable.

2008 Q2
On the sources of macroeconomic stability (577KB)
By Garry Young
In September 2007, the Bank of England hosted an international conference on the sources of macroeconomic stability. This article summarises some of the ideas and debates that were raised at the conference. It focuses particularly on the role of monetary policy in fostering macroeconomic stability and draws out some of the implications for policy and research. These issues are relevant to the current economic situation. The UK economy is likely to be better able to withstand the turbulence it is currently experiencing if the previous prolonged period of stability was caused by sustainable structural change and an improved policy framework.

2008 Q1
The Society of Business Economists' survey on MPC communications (506KB)
By Tim Taylor, Iain de Weymarn and Bronwyn Curtis
This article reports the results of the Society of Business Economists' (SBE) survey of its members' views on MPC communications. The survey found that, when forming a view about interest rate prospects, SBE members looked first at the macroeconomic data. Communications by the MPC were the next most important input. Overall, a large majority of respondents (87%) found MPC communications either 'helpful' or 'very helpful'. But there was some room for improvement. For example, the results suggested that the MPC could have done a better job of explaining how it responded to developments in the data. The enhanced coverage of risks and identification of key forthcoming data releases in recent Inflation Reports should help to address this issue. But the MPC's communication strategy continues to evolve, and the survey results will be a useful input to that process.
The survey data are available in Excel format (119k)

2007 Q1
The Monetary Policy Committee of the Bank of England: ten years on (850KB)
Compared to past performance, UK inflation has been low and unusually stable since the inception of inflation targeting, while GDP growth too has been remarkably stable. In part that reflects the effectiveness of the inflation-targeting framework and the current institutional arrangements, particularly by anchoring inflation expectations and reducing the sensitivity of inflation to demand and cost shocks.

But other factors have also provided a benign context for the MPC's efforts: cheaper imports and increased competitive pressures associated with globalisation; and increases in labour supply, associated in part with inward migration. Both have dampened inflationary pressures and reinforced the changes in the inflation process associated with the change in monetary regime. The environment is unlikely to be so benign in the future.

The submission also covers the impact on monetary policy of a number of particular issues that have been relevant to the MPC's deliberations over the past decade: the balance of demand and the exchange rate; money supply and liquidity; asset prices; household debt; and investment.

Summer 2006
Reflections on operating inflation targeting (366KB)
Speech by Paul Tucker, at the Chicago Graduate School of Business
Sets out some reflections on the operation of an inflation-targeting regime after four years on the MPC. Addressing the key objectives of modern central banking and how they may be met, the central role of anchoring medium to long-term inflation expectations is emphasised. On the second element in the conduct of policy - stabilisation of the path of demand and output, to help meet the inflation target and as worthwhile in its own right - he argues that 'rough tuning' is a more feasible objective than attempts at fine tuning, in the face of limited knowledge about structural change in the economy and inevitably imperfect data. Turning to four issues of strategy for modern policymakers, he offers some comments on whether central banks should publish an expected policy path; on whether there is a time-consistency problem in their operation of stabilisation policy; on whether price-level targeting could make stabilisation policy more effective; and on how central banks should respond to asset prices. A thread running through the speech is that the successful operation of policy requires straightforward communication by central banks about policy objectives and the conduct of policy, without glossing over uncertainties and risks.

Autumn 2005
Assessing the MPC’s fan charts (885KB)
By Rob Elder, George Kapetanios, Tim Taylor and Tony Yates
The MPC places considerable weight on its economic forecasts when setting monetary policy. But there is inevitably uncertainty around the outlook for the economy, and to communicate this, the MPC publishes its projections as fan charts. This article discusses some of the issues that must be taken into account when assessing those fan charts, it reports a range of formal and informal tests of various aspects of the MPC’s fan charts, and it discusses developments in the economy that may have pushed outturns away from the MPC’s central projections. With only six years of fan chart projections that can be compared with outturns, the sample is too small to draw strong conclusions. But to date, at most forecast horizons, inflation and output growth outcomes have been dispersed broadly in line with the MPC’s fan chart bands. That suggests that the fan charts gave a reasonably good guide to the probabilities and risks facing the MPC.

Spring 2005
Monetary policy in an uncertain world (128KB)
Accompanying PowerPoint Slides (176KB)
Speech by Charlie Bean, given at Oxonia Distinguished Speakers Seminar, The Oxford Institute of Economic Policy
Reviews and assesses the three types of uncertainty which affect monetary policy makers: uncertainty about the data; uncertainty about the nature and persistence of shocks; and uncertainty about the structure of the economy. He notes the unusual stability of inflation and output growth in the past decade or so. The short-run trade-off between inflation and activity seems to have flattened as inflation has stabilised at low levels, which is partly due to improved monetary policy making.

Autumn 2004
Some current issues in UK monetary policy (114KB)
Speech by Charlie Bean, at the Institute of Economic Affairs
Notes that the increase in gross household debt has been primarily associated with asset accumulation rather than borrowing in order to finance consumption, so any impact of debt on the macroeconomic outlook depends on differences in the behaviour of lenders and borrowers. Also argues that, if interest rates are a long way from 'normal', forecasts for inflation and growth assuming that rates follow a path implied by the financial markets provide a more useful picture of economic prospects than assuming interest rates remain constant.

Autumn 2004
Managing the central bank's balance sheet: where monetary policy meets financial stability (527KB)
Lecture by Paul Tucker, at Lombard Street Research
Sets out the analysis underlying the Bank's announcement on 22 July of major reforms to its operations in the sterling money markets. Outlines the problems with the current framework and argues that the new system represents a fundamental change in how the Bank thinks about the implementation of monetary policy, the lubrication of the wholesale payments system, and the provision of liquidity insurance to the banking system.

Summer 2004
Boring bankers - should we listen? (130KB)
Speech by Richard Lambert, to the Institute for Public Policy Research
Discusses the importance of good communications to modern central banks and concludes that there might be room for the Bank to build yet more public support for price stability by seeking to communicate to a broader range of audiences.

Spring 2004
The Governor's speech at the annual Birmingham Forward/CBI business luncheon 
Argues that the recent change in the inflation target is unlikely to have any material impact on the decisions of the MPC in the near future and that economic decisions by businesses and individuals over the next year or so should be unaffected too.

Spring 2004
Inflation targeting - achievement and challenges (123KB)
Speech by Rachel Lomax, to the Bristol Society at the University of the West of England
Reviews the improvement in economic performance associated with inflation targeting, and explains why this approach to monetary policy works well. Concludes that an open approach to uncertainty and disagreement has underpinned the MPC's credibility, and increased its ability to respond to changing circumstances.

Spring 2004
Risk, uncertainty and monetary policy regimes (263KB)
Speech by Paul Tucker, to the UK Asset and Liability Management Association
This speech explores how option prices can shed light on the risks in the current financial environment, including uncertainty about the expected path of monetary policy. Market uncertainty seems not to have been influenced by the recent change in the Government's inflation target.

Winter 2003
Inflation targeting: the UK experience (282KB)
Speech by Charles Bean, at the annual meeting of the German Economic Association
Reviews the background to the adoption of an inflation target in 1992 and the subsequent development of the regime, in particular the delegation of operational responsibility for monetary policy to the Bank in 1997 and the associated institutional framework. Also discusses some aspects of performance since then, and how monetary policy should respond to asset price booms and high rates of debt accumulation.

Spring 2003
Adjusting to low inflation - issues for policy-makers (196KB)
Speech by Kate Barker delivered at the Manchester Statistical Society Meeting

Considers some of the implications for the United Kingdom of the transition to a low-inflation regime.

Spring 2003
Report on modelling and forecasting at the Bank of England (173KB)
By Adrian Pagan

Report to the Court of Directors of the Bank of England on the modelling and forecasting systems within the Bank. Followed by Bank's response to the Pagan Report (36KB).

Spring 2003
Monetary policy and the zero bound to nominal interest rates (93KB)
By Tony Yates

Assesses likelihood of nominal interest rates reaching their lower bound of zero in the United Kingdom. Reviews what the academic literature has to say about the scope for alternatives to cutting interest rates in the improbable event that nominal interest rates do reach zero.

Winter 2002
The inflation target ten years on (282KB)
Lecture to the London School of Economics by Mervyn King

Re-examines the case for price stability ten years after Robin Leigh Pemberton asked the same question in the first LSE-Bank of England lecture. Mervyn King asks three questions. Did the benefits of low inflation promised ten years ago materialise? What does price stability mean in practice? And finally, what are the challenges for monetary policy over the next decade?

Autumn 2002
Committees versus individuals: an experimental analysis of monetary policy decision-making (89KB)
By Clare Lombardelli, James Talbot and James Proudman

This article reports the results of an experimental analysis of monetary policy decision-making under uncertainty.

Autumn 2002
Monetary policy issues: past, present, future (88KB)
Speech by Professor Stephen Nickell, delivered at a lunch organised by Business Link and the Coventry and Warwickshire Chamber of Commerce in Leamington Spa

Considers four issues. First, has the MPC exhibited a deflationary bias? (No). Second, is the United Kingdom going to experience a surge in trend productivity growth in the near future for New Economy reasons? (No). Third, the 'imbalances' that currently afflict the UK economy. Fourth, the current prospect for monetary policy. This explains why, when the MPC central projection for inflation rises above target at the two-year forecast horizon, this should not automatically imply a rise in interest rates.

Summer 2002
The Monetary Policy Committee: five years on (49KB)
Speech by Mervyn King, delivered to the Society of Business Economists in London

Reflects on the first five years of the Monetary Policy Committee. He poses four questions about the role and record of the MPC. First, why give the power to decide interest rates to a committee rather than an individual? Second, does it matter that the MPC frequently disagrees about its decision? Third, has the Committee communicated clearly the reasons for its decisions? Fourth, does the MPC require reform?

Winter 2001
The formulation of monetary policy at the Bank of England (86KB)
By Charles Bean and Nigel Jenkinson

This article describes the internal processes adopted by the Monetary Policy Committee and the Bank for the formulation of monetary policy. It covers the regular monthly policy round as well as the quarterly forecast round and the preparation of the accompanying Inflation Report.

Spring 2001
The Kohn Report on MPC procedures (80KB)
By Donald L Kohn

Report to the non-executive Directors of the Court of the Bank of England on monetary policy processes and the work of Monetary Analysis. Followed by Bank of England response to the Kohn Report (32KB).

May 2000
The new economy and the old monetary economics (136KB)
Speech by Willem H Buiter given to the Aberdeen Chamber of Commerce

Argues that the behaviour in recent years of the world economy, led by the United States, can, in the opinion of a number of observers, only be understood by abandoning the old conventional wisdoms and adopting a 'New Paradigm'. Makes two distinct points. First, the New Paradigm has been over-hyped. Second, to the extent that we can see a New Paradigm in action, its implications for monetary policy have often been misunderstood.

November 1999
Challenges for monetary policy: new and old (159KB)
Paper by Mervyn King prepared for the Symposium on 'New challenges for monetary policy' sponsored by the Federal Reserve Bank of Kansas City at Jackson Hole, Wyoming

Argues that central banks have reached a record high in terms of their power and reputation. But to retain that position, they have to face two major challenges in a low inflation environment. The first is to decide on the objective for monetary policy. The second challenge is to improve central banks' understanding of the transmission mechanism. Concludes by speculating about the future of central banks.

August 1999
The use of explicit targets for monetary policy: practical experiences of 91 economies in the 1990s (50KB)
By Gabriel Sterne

In June 1999, the Bank of England hosted its sixth Central Bank Governors' Symposium. The subject was 'Monetary policy frameworks in a global context', based on a report prepared by DeAnne Julius of the Bank's Monetary Policy Committee and Maxwell Fry, Lavan Mahadeva, Sandra Roger and Gabriel Sterne of the Bank's Centre for Central Banking Studies (CCBS). This article draws on one of the chapters of the report, which uses a survey of 91 central banks to assess developments in monetary frameworks across a wide cross-section of economies.

August 1999
The MPC two years on (52KB)
Speech by Mervyn King given at Queen's University Belfast

Looks back over the first two years of the Monetary Policy Committee. Notes that it is too early to judge the Committee's performance against the recent history of inflation. Discusses challenge of building a 'constituency for low inflation'.

May 1999
Economic models and monetary policy (157KB)
Speech by John Vickers given at the National Institute of Economic and Social Research

Discusses the role of economic models in monetary policy-making, and explains why the Bank uses a suite of models, rather than a single model, to assist its forecasting and analysis.

May 1999
Monetary policy and uncertainty (50KB)
By Nicoletta Batini, Ben Martin and Chris Salmon

Describes various types of uncertainty that policy-makers may face. It summarises analysis, including recent work by Bank staff, that shows how different forms of uncertainty could lead to different policy responses.

May 1999
The Bank's use of survey data (66KB)
By Erik Britton, Joanne Cutler and Andrew Wardlow

Provides a brief outline of how surveys are used to inform the MPC's economic assessment and policy decisions.

February 1999
Monetary policy rules and inflation forecasts (50KB)
By Nicoletta Batini and Andrew Haldane

Compares the use of simple backward-looking interest rate rules for monetary policy with policy rules that respond to forecasts of future inflation, in line with monetary policy behaviour in real world.

November 1998
Economic policy, with and without forecasts (29KB)
Speech by Sir Alan Budd at the Sir Alec Cairncross Lecture

Discusses the debate between those who believe that monetary policy should be based on a small number of current indicators and those who use model-based forecasts to assist their decisions. Describes the role of the inflation forecast in the MPC's decisions.

November 1998
Inflation targeting in practice: the UK experience
Speech by John Vickers at the conference on Implementation of Price Stability held in Frankfurt
Discusses theoretical and practical issues relating to inflation targeting as used in the United Kingdom during the past six years.

February 1998
The Inflation Report projections: understanding the fan chart (354KB)
By Erik Britton, Paul Fisher and John Whitley

Discusses motivation for publishing forecast as a probability distribution. Describes how fan chart is produced and explains how it reflects forecast process.

November 1997
The Inflation target five years on (54KB)
Speech by Mervyn King at LSE to mark the tenth anniversary of the LSE Financial Markets Group

Outlines use of inflation targets since introduction of one in UK 5 years previously. Reviews the experience of inflation-targeting countries, discusses charge that inflation targets ignore output, explains role of inflation forecasts and stresses the importance of transparency and accountability. Concludes that current monetary policy framework represents significant and successful developments in central bank operations in the 1990s.

May 1997
Economic models and policy-making (46KB)
By John Whitley

Describes and evaluates the role of macroeconomic models at the Bank of England in the process of policy advice.

February 1997
Evolution of the monetary framework (25KB)
Lecture given by the Governor at Loughborough University

Reviews developments in the monetary policy framework since the first Loughborough Lecture on financial change and broad money, given by Robin Leigh-Pemberton ten years ago.

February 1997
Britain's regional economies: how different are they, and how should those differences affect monetary policy? (85KB)
A lecture by the Deputy Governor at Darlington

Considers the degree to which the United Kingdom's regional economies differ, in economic terms and what implications this has for monetary policy.

November 1996
How should central banks reduce inflation? - conceptual issues (131KB)
Paper by Mervyn King prepared for the symposium on 'Achieving Price Stability' sponsored by the Federal Reserve Bank of Kansas City

Discusses how quickly a central bank should reduce inflation to its desired level following an inflationary episode.

August 1996
Simple monetary policy rules (51KB)
By Alison Stuart

This article describes two simple rules, the McCallum rule and the Taylor rule, that could in principle be used to guide monetary policy. It then applies the rules to past UK data.

February 1996
Central bank independence and accountability: theory and evidence (33KB)
By Clive Briault, Andrew Haldane and Mervyn King

How accountability relates to central bank independence. Why central banks should be accountable and how accountability and transparency can help to reduce the inflation bias which might otherwise result from discretionary policy-making.

November 1995
Do inflation targets work? (14KB)
Speech by Mervyn King to the Centre for Economic Policy Research

Looks at the growing use of inflation targets. Considers what their use may achieve; what has so far been achieved; and how in the future they may help in the setting of monetary policy.

August 1995
Inflation targets (44KB)
By Andrew Haldane

Summarises a number of the main issues - both conceptual and technical - raised by the use of inflation targets, which were discussed at Bank conference on inflation targeting.

February 1995
Credibility and monetary policy: theory and evidence (53KB)
Lecture by Mervyn King in the first annual Scottish Economic Society / Royal Bank of Scotland lecture in Edinburgh

Looks at the concept of credibility in monetary policy, why it is important and how it can be measured.

November 1992
The case for price stability (947KB)
Inaugural LSE Bank of England lecture by Robin Leigh-Pemberton, Governor of the Bank of England

Discussion of case for price stability. Price stability will only be achieved if the policies aimed at this objective are credible. Introduces new regime and commitment to publishing Inflation Report.