Monetary Targets and the Control of the Money Supply

Abstract

This article discusses the experience to date with monetary targets. The first section briefly surveys the historical background to the adoption of monetary targets and gives a résumé of monetary policy during the last three years. Without delving deeply into the subtleties of the complicated art of central banking, the next section gives an inter pretation of what the Bank of England actually does when it attempts to control the money supply, which does not correspond at all closely to the simple representation of the techniques of money supply control contained in some of the standard economics textbooks. Attention is also drawn to the problems of the present approach to monetary policy making. Finally an assessment of the performance of recent policy is offered.