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- Title
The MPC comes of age.
- Abstract
As the MPC's tenth anniversary approaches, Rachel Lomax, Deputy Governor for monetary policy, considers what was special about the 1997 policy framework, and how age and success have changed it. In her view, the key characteristic of the current approach to monetary policy is ‘constrained discretion’ — the combination of a strong commitment to low inflation with considerable flexibility to respond to shocks. While the so-called Great Stability of the past decade has bestowed on the MPC ‘the great gift of credibility’, it has had both helpful and unhelpful legacies. On one hand, the credibility of the framework has helped to contain inflation, in the face of large shocks. On the other, the public may have acquired unrealistic expectations about what monetary policy can achieve. She concludes that the policy framework can only offer flexibility as long as it remains credible. But that credibility needs to reflect reality.
- Subjects
UNITED Kingdom; MONETARY policy; MANAGEMENT committees; BANK of England; ECONOMIC policy; MONETARY theory; LOMAX, Rachel; CENTRAL banking industry
- Publication
Bank of England Quarterly Bulletin, 2007, Vol 47, Issue 1, p106
- ISSN
0005-5166
- Publication type
Article