objectives

Chris Giles

The title of this post might seem an odd question. But this long analysis with oodles of quotes has demonstrated to me that I no longer have a good answer. I am confused and I know I am not alone.

Judging by Mervyn King’s 2006 Mansion house speech, the governor of the Bank will be concerned that there is confusion about the Bank’s objective and its analysis. Then, he said the answer to my question was fundamental for outsiders’ understanding of a central bank’s monetary policy:

“in order to form judgements about the likely path of interest rates over somewhat longer time horizons, markets do require some information from the central bank.  To be precise, two key pieces of information – our objective, and our analysis of the economy. Our objective is the 2% inflation target given to us by the Chancellor and plain for all to see.  And our analysis of the economy is published in the minutes of our monthly meetings, in more detail in our quarterly Inflation Report, and in speeches by members of the MPC.”
(emphasis in original)

The Bank’s objective and analysis might have been plain to see in the hubristic days of 2006, but it is far from clear today, particularly after last week’s speech by the governor. Read more