Given the long and variable time lags between interest rate changes and responses in output and inflation, an inflation forecast must lie at the heart of monetary policy. In the UK the Bank’s inflation forecast and Report were developed when the interest rate decision still lay with the Chancellor. Its, largely unchanged, continuation has led to certain tensions once that decision was delegated to a Monetary Policy Committee of independently responsible experts. In this paper the question is raised whether such a Committee should be jointly and individually responsible for the inflation forecast, and what might be considered as alternative procedures.
Get full access to this article
View all access options for this article.
References
1.
Bank of Canada (1994), Economic Behaviour and Policy Choice under Price Stability, Proceedings of a Conference held in October 1993.
2.
Bank of Canada (1997), Price Stability, Inflation Targets and Monetary Policy, Proceedings of a Conference.
3.
Bank of England (1999), Economic Models at the Bank of England, and Economic Models at the Bank of England (updated in September 2000).
4.
Bank of England, Monetary Policy Committee, Inflation Report, quarterly.
5.
Bank of England, Monetary Policy Committee,(1999), The Transmission Mechanism of Monetary Policy, London, Bank of England.
6.
Bank of England Act (1998), www.legislation.hmso.gov.uk/acts/acts1998/19880011.hmt.
7.
Beattie, A. (2000), ‘A talent to bemuse’, Financial Times, 29 June, p. 27.
8.
Brown, G. (Chancellor of the Exchequer) (1997), ‘Letter to the Governor of the Bank of England’, 6 May, www.hmtreasury.gov.uk/press/1997/p40_let.hmtl.
9.
Gaspar, V. and Smets, F., (2000), ‘Price level stability: some issues’, National Institute Economic Review, 174, October, pp 68-79.
10.
George, E.A.J. (2000), ‘Interview: Sir Eddie George’, Central Banking, XI, 1, August, pp. 22-32.
11.
Levin, A., Wieland, V. and Williams, J. (1999), ‘Robustness of simple monetary policy rules under model uncertainty’, Chapter 6 in Taylor, J.B. (ed.), Monetary Policy Rules, Chicago, University of Chicago Press for NBER.
12.
Svensson, L. (1999a), ‘Price level targeting vs. inflation targeting. A free lunch’, Journal of Money, Credit and Banking, 31, pp. 277-295.
13.
Svensson, L. (1999b), ‘Inflation targeting as a monetary policy rule’, Journal of Monetary Economics, 43, pp. 607-654.
14.
Wadhwani, S. (1999), ‘Currency puzzles’, Speech given at the London School of Economics, September, www.bankofengland.co.uk/speeches/speech53.pdf.
