Monetary policy realities

Quarterly Bulletin 1995 Q4
Published on 01 December 1995

The Governor explains the background to—and the limited extent of—his disagreement with the Chancellor earlier in the year. This was neither about the aim of monetary policy—preserving the best prospect of sustained expansion for decades—nor about the means of achieving it: by maintaining permanently low inflation. It was a narrow difference of judgment about the need for a further rise in interest rates in order to achieve the inflation target, in a situation in which that judgment was particularly difficult. He underlines the need to distinguish this narrow difference of judgment from the seductive—and dangerous—position of some critics, who want monetary policy to be used to boost activity in the short term and are prepared to take bigger risks with inflation.

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