Working paper No. 97
By Hasan Bakhshi and Tony Yates
Although the target of monetary policy is clear, there have been suggestions that the conduct of monetary policy is improved by monitoring ‘trimmed mean’ inflation rates, the mean of some central portion of the distribution of price changes. This paper assesses critically the theoretical and empirical arguments for trimming, and applies Bryan et al’s (1997) concept of the ‘optimal trim’ to the United Kingdom.