Independence of Bank of England

Independence of the Bank Of England

  1. Govt nominates the nine members of the MPC
  2. The govt sets an inflation target each year currently RPIX =2.5% +/-1.

 In theory this could change every year, although in practice it is likely to stay the same for the foreseeable future.


Policy Objectives of Bank of England and UK Monetary Policy

  1. Maintain Price stability (target CPI = 2.0% +/- 1)
  2. In addition support the economic policy of the govt, including its objectives for growth and employment.


Notice the target doesn’t aim for 0 inflation. Deflation can actually cause problems. Low inflation can be beneficial for allowing relative prices to change and reflect changes in quality of goods.

The overriding aim is for stable prices as a precondition for high and stable growth


 See also: Monetary Policy
Bank of England and Inflation

Bank of England

How Bank Predicts Inflation

Controlling Money Supply

Independence of B of E

Monetary Policy UK

MPC on Inflation