The aim of monetary policy is to defeat inflation, and interest rates are set to meet that aim. For the growth of the narrow measure, M0, a target range is set as a yardstick for policy. But for broader measures, where relationships have proved to be more complex, targets have not been set since 1986/87. This article describes the results of recent research in the Bank which throws some new light on the various factors determining the growth of different measures of money (the 'monetary aggregates').
The determination of the monetary aggregates