Monetary Policy Issues: Past, Present, Future

Abstract

In this speech, Professor Stephen Nickell considers four issues. First, has the MPC exhibited a deflationary bias? The answer is no. Second, is the United Kingdom going to experience a surge in trend productivity growth in the near future for New Economy reasons? The answer is no. Third, there is an analysis of the "imbalances" that currently afflict the UK economy. The broad conclusion is that unsustainable imbalances do not require any special response from the MPC over and above its watching brief on inflationary pressures looking forward. Fourth, there is a discussion of the current prospect for monetary policy. This explains why, when the MPC central projection for inflation rises above target at the two-year forecast horizon, this should not automatically imply a rise in interest rates.