The MPC's Policy Dilemma - speech by Charles Bean

In a speech to the Association of British Insurers 2011 Economics and Research Conference, Charles Bean - Deputy Governor for Monetary Policy and member of the Monetary Policy Committee (MPC) - focuses on the sources of above-target inflation in the United Kingdom, whether it is likely to persist and what monetary policy should seek to do about it.

Published on 03 March 2011

In light of the margin of spare capacity in the economy caused by the recession, Charles Bean asks why inflation is so far above the MPC's 2% target, and higher than the MPC expected. He points to three factors: strong global price pressures, particularly for energy and other commodities; the depreciation of sterling following the onset of the financial crisis; and the increase in the main VAT rate to 20%. He goes on to describe how these factors are likely to have affected inflation, and by how much.

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