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- Title
Inflation targeting in practice: models, forecasts and hunches.
- Abstract
In this speech, Rachel Lomax, Deputy Governor responsible for monetary policy, reviews the role that model-based forecasts play in the monetary policy process, with particular reference to the Bank's new quarterly model and continuing research into other statistical approaches. The Bank's models provide a consistent framework for considering alternative scenarios and risks but judgement always plays a large role in constructing forecasts. It is hard to say precisely how important forecasts are in driving policy decisions, but there is some evidence that the rethink of key issues during the forecast round has been a source of policy `surprises'. Forecasts also play a central part in communicating the MPC's thinking to the outside world. But forecasts are highly fallible. So the MPC's forecast-centred approach to inflation targeting has gone hand in hand with a determined effort to illustrate the wide range of uncertainties around its central projections.
- Subjects
PRICE inflation; ECONOMIC models; FISCAL policy; ECONOMIC policy; MATHEMATICAL models; MONEY supply
- Publication
Bank of England Quarterly Bulletin, 2005, Vol 45, Issue 2, p237
- ISSN
0005-5166
- Publication type
Article