Two Current Monetary Policy Issues

Abstract

In this speech, Stephen Nickell, member of the Bank's Monetary Policy Committee, looks at two issues: first, the impending switch to targeting the HICP inflation rate and, second, the implications of the steady rise in household debt. The key conclusion on the first issue is that a switch to an HICP target of 2% today should have little or no impact on the current stance of monetary policy despite the large gap between RPIX and HICP inflation. On the second issue, he dismisses the argument that interest rates should be set above the level required to hit the inflation target in order to discourage further household debt accumulation.