CONTENTS
REPORT
CHAPTER 1 THE ACT AND THE PRIORITY GIVEN
TO INFLATION CONTROL
The reasons for giving priority to controlling
inflation over other possible objectives, costs and benefits
The choice of inflation targeting as the
means of conducting monetary policy as opposed to previous monetary
policies and that of the ECB
The experience of the past and of other countrie
Giving the Bank independent control of monetary
policy via the MPC
The clarity and feasibility of the emphasis
on inflation and the subsidiary role of supporting the Government's
other objectives
Compatability of low inflation with the Government's
other economic objectives
The remit of the MPC
The extent of the discretion available to
the MPC in the short term through the letter writing
The implications of a letter for Government
policy more generally
Should the Bank and not the Government choose
the inflation target as in other countries?
CHAPTER 2 THE MONETARY POLICY COMMITTEE
The division of responsibility between
the MPC and the Government
The choice of members of the MPC
The restrictions on choice provided by requiring
no conflict of interest
Method of selection
The role of internal and external members
The role of the Court (and the provision
of information to the MPC)
The accountability of the MPC: its desirability
and the ways it is achieved
The openness and transparency of the deliberations
of the MPC and its decisions
The voting arrangements
Communications between the MPC and the Government
How effective are the Inflation Report and
the Minutes
CHAPTER 3 THE CHOICE OF INFLATION
TARGET
The benefits of low inflation
The justification for a 2.5 per cent target
The measure of inflation used: RPI, RPIX,
HICP and whether to include the first-round effects
The choice of a symmetric target
The relation between a symmetric target and
the distinction between short and long term inflation objectives
CHAPTER 4 THE TECHNIQUES AND TRANSMISSION
MECHANISM OF MONETARY POLICY
The background to current monetary policy
Inflation targeting
The transmission mechanism
(a) The domestic channel
(b) The exchange rate channel
The exchange rate and interest rates
Inflation and the exchange rate
A quantitative assessment
Techniques of monetary policy
The choice of interest rates as the monetary
policy instrument
The degree of independence of United Kingdom
rates
The size, frequency and predictability of
interest rate changes
Rules versus discretion
The role of inflation and other forecasts
The open letter and how to respond to inflation
that is due to supply shocks
CHAPTER 5 THE RELATIONSHIP BETWEEN
MONETARY AND FISCAL POLICY
How does the MPC take account of fiscal
policy?
What is the role for fiscal policy?
To what extent can the side effects of monetary
policy be mitigated by fiscal policy?
Should there be an exchange rate policy?
CHAPTER 6 THE RECORD SO FAR
What has happened to inflation?
To what extent is this due to the MPC?
Has this been an unusually benign period
for inflation?
How much of the exchange rate changes have
been due to United Kingdom monetary policy?
Has monetary policy been synchronized more
with the US than with the Euro-zone?
What have been the costs of the policy to
date?
CHAPTER 7 FINAL INTERPRETATIONS AND
CONCLUSIONS
Operational independence
Section 11 and the MPC's remit
Art or science?
The level of interest rates
Voting on the MPC
The MPC's members
The Court
The measurement of inflation
The MPC's achievements
The exchange rate
Transparency
Our role
SUMMARY OF RECOMMENDATIONS
Appendix 1—Membership
of the Committee
Appendix 2—List
of witnesses
Appendix 3—RPIX
and HICP
Appendix 4—Uncovered
interest rate parity (UIP)
Appendix 5—Graphs
of economic indicators
NOTE: Pages of the Report are numbered in bold type,
pages of evidence are numbered in ordinary type. References in
the text of the Report are as follows:
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