By Erik Britton of the Bank’s Structural Economic Analysis Division, and Joanne Cutler and Andrew Wardlow of the Bank’s Conjunctural Assessment and Projections Division.
The Bank of England’s Monetary Policy Committee (MPC) is charged with the task of achieving the Government’s inflation target. A central part of this task involves interpreting information about the current state of the UK economy, and assessing its medium-term prospects. Surveys form part of the broad range of information available to the MPC, along with official statistics, data from financial markets, and the information provided by the Bank’s regional Agencies. In this sense, surveys complement other sources of information. But importantly, the forward-looking nature of many survey responses means that they often provide information that is additional to official and other sources of data.
Surveys are numerous and varied, so it is important to use the information as systematically as possible, to ensure a consistent approach to identifying the important news in survey information and to avoid ‘cherry-picking’ survey results. This article explains how survey information has been used at the Bank in the past few years; it follows an earlier Bulletin article on the quantification of survey data (see Cunningham (1997)),(1) and parallels work that has been done elsewhere.(2) The first section discusses the nature of survey information; the second explains how survey information is used at the Bank: how survey information is transformed into quantitative estimates and how the ‘news’ in surveys can be identified. The third section offers some conclusions about the use of survey information for monetary policy.