Current issues in monetary policy - speech by Paul Fisher

In a speech delivered today, MPC member Paul Fisher discusses some of the challenges associated with setting monetary policy over the past three years.
Published on 21 June 2011

Speaking at The Global Borrowers & Investors Forum in London, he says that it is necessary “…to look at the source of the shocks to understand their inflationary consequences and judge the appropriate policy prescriptions”. He argues that the persistently elevated rates of CPI inflation over the past two years have reflected three real relative price shocks – the rise in VAT, increases in global commodity prices, and fall in sterling since mid-2007. Paul Fisher believes that there is no simple solution to dealing with these real shocks, noting that changing the MPC’s remit or amending the inflation target would not magic away the problem. “The unfortunate and difficult truth is that the shocks that have hit the economy recently have not been caused by monetary conditions. They are real economy shocks which make us individually and collectively worse off – we have to pay more tax, we have to pay more, in real terms, for petrol, gas, electricity and imported goods or services.”

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