Implications and Relevance
Edited by Phillip Arestis, Michelle Baddeley and John S.L. McCombie
Chapter 9: The Old Lady in new clothes: uncertainty and the UK monetary policy framework
Mark Roberts 1. INTRODUCTION1 The last decade has witnessed substantial reform of monetary policy operating procedures in many developed countries, with the general trend being towards more open and independent central banks.2 No better example of this is provided than by the UK. First, in the wake of sterling’s departure from the Exchange Rate Mechanism (ERM) in September 1992, we saw, for the ﬁrst time, the introduction of an explicitly announced target for inﬂation. This was quickly followed in February 1993 by the introduction of a quarterly Inﬂation Report published by the Bank of England and providing a regular assessment of the outlook for UK growth and inﬂation. However, the most signiﬁcant reforms to the UK monetary policy framework came in May 1997, immediately following Labour’s landslide general election victory.3 These reforms retained, in a modiﬁed form, the explicit (government-set) inﬂation target introduced in 1992,4 but delegated responsibility for the meeting of this target to the Bank of England as part of a new institutional framework for monetary policy. This new institutional framework emphasizes the need for transparency and accountability to an extent perhaps unparalleled in the history of monetary policymaking.5 Certainly, long gone are the days by which the Governor of the Bank of England can live by the maxim ‘Never explain, never excuse’ by which Montague Norman, Governor in the 1930s, lived (quote given in Boyle, 1967, p. 217). As has been widely commented upon, not least by members of the...
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