Perspectives on Current Monetary Policy

Speaking to the Cardiff Business Club tonight, Rachel Lomax, Deputy Governor for Monetary Policy, looks at the longer-term international context for UK monetary policy, and links this to the challenges now facing the MPC.
Published on 27 November 2006

Noting that the UK has not been alone in enjoying a decade of unusual stability, she observes that economists have debated whether the 'Great Stability', as it has been called, is the result of good luck or good policy. She argues that there has been a virtuous circle over the past 10 to 15 years, in which central banks have taken advantage of relatively favourable global conditions to implement successfully better policy-making frameworks and establish strong reputations for competence. But this increase in stability was not foreseen when the MPC was set up. Its formal remit makes allowance for situations in which inflation might be thrown sharply off course, and where attempts to keep it close to the target might cause undesirable volatility in output.

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