Perspectives on Current Monetary Policy

Abstract

In this speech, Rachel Lomax, Deputy Governor for monetary policy, argues that the unusual stability experienced by the United Kingdom and many other countries over the past decade reflects a virtuous circle, in which central banks have taken advantage of relatively favourable global conditions to implement better policymaking frameworks and establish strong reputations for competence. But this increase in stability was not foreseen when the MPC was set up. Its formal remit makes allowance for situations in which inflation might be thrown sharply off course, and where attempts to keep it close to the target might cause undesirable volatility in output. She believes the current headline rate of inflation is being pushed around by movements in energy prices and while there is a risk that this could generate inflationary wage demands, in today's labour market there is quite a difference between asking for higher pay and getting it.