Add thelocalreport.in As A Trusted Source
According to the institution’s chief economist, the Bank of England’s 2% inflation target provides a “benchmark” against which monetary policymakers can be held accountable.
Speaking at the University of Birmingham, Bank of England chief economist Hugh Pill said the economist alan greenspan “Price stability was famously defined as an inflation rate that was low and stable enough to not affect the economic decisions of firms and households”.
He said: “The UK monetary policy framework takes this further by defining an explicit 2% inflation target for a specific price index (consumer price index), which remains in place at all times and punishes deviations up or down in a symmetric manner.
“This quantitative target is clearer and simpler than Greenspan’s definition, provides a benchmark against which monetary policymakers can be held accountable, and has helped moderate long-term inflation expectations.”
Mr Pill said: “A simple, clear, stable and unambiguous mandate for monetary policy expressed through an inflation target has shown its value.
“In contrast to what was seen in the 1970s and 1980s, significant external inflation shocks to the UK economy in recent years have not triggered a de-anchoring of inflation expectations and a non-stationary upward drift in inflation outcomes.
“Rather, there has been a clear reversal towards the 2% inflation target – admittedly not yet met, but a clear direction of travel has nonetheless been identified MPC “The (Bank of England Monetary Policy Committee) recently implemented restrictive policy reflects the monetary policy stance.”
CPI inflation stood at 3.8% in August, the highest level since the beginning of 2024 and above the Bank’s 2% target rate.
Eat And beverage inflation rose to 5.1%, the fifth consecutive month in which price increases have accelerated.
In September, the Bank of England kept interest rates at 4% as it said the UK was “not out of the woods” on inflation, with taxes driving up food costs.
Receive free fractional shares worth up to £100.
Capital at risk.
terms and Conditions apply.
Advertisement
Receive free fractional shares worth up to £100.
Capital at risk.
terms and Conditions apply.
Advertisement