News Release
Loughborough University Banking Lecture
07 November 96
In this speech the Governor reviews developments in the monetary policy framework since the first Loughborough Lecture on financial change and broad money, given by Robin Leigh-Pemberton 10 years ago. The Governor describes the immediate aftermath of the abandonment of broad money targeting, and our experience with exchange rate targeting including the ERM. Finally, he describes the present monetary framework, based on an inflation target, and the role of the Bank of England in it. Assessing the present arrangements, the Governor says
"But the results so far are encouraging. Inflation itself over the past 4 years, on the target measure, has averaged 2.7%. This compares with an average of nearly 10% in the 20 years before we adopted the inflation target in 1992, including one single year when inflation rose by nearly 25%. Activity has grown consistently - and reasonably steadily - for eighteen successive quarters - at an average annual rate of 2.6%. Unemployment has fallen almost month by month during this period, from a peak of over 10 1/2% to below 7.4% now. And the prospect for the next 2 years - the extent of most forecasting horizons - remains very encouraging, with most forecasters predicting continuing steady growth with low inflation.
And though it may be tempting fate to say so we have not had a serious financial crisis during the whole of this time. Where in the past policy was too often made on the hoof, in Pavlovian reaction to pressures in the financial markets, it now seeks to anticipate events and is based upon a regular, systematic and structured discussion of the economic facts. You cannot imagine what a difference this has made."
For a copy of this speech please contact Public Information and Enquiries Group on 0207 601 4878
