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13 - The MPC

Then and Now

from V - Lessons for Central Bank Independence

Published online by Cambridge University Press:  14 November 2024

By
Mervyn King
Edited by
Sean Holly ,
Michael McMahon ,
Stephen Millard  and
Anna Watson
Sean Holly
Affiliation:
University of Cambridge
Michael McMahon
Affiliation:
University of Oxford
Stephen Millard
Affiliation:
National Institute of Economic and Social Research
Anna Watson
Affiliation:
University of Cambridge
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Summary

One of the enormous contributions of the Monetary Policy Committee is simply to make interest rate decisions a systematic process reflecting the needs of the economy. Over 25 years, the MPC has, I think, proved a great success in institutional reform. Inflation averaged close to the 2% target, at least until 2021. People accepted that this was a good way of making technocratic judgements to meet a target set by Parliament. This chapter offers five lessons for the continuing conduct of monetary policy. Inflation targeting is a way of living not a theory of the monetary transmission mechanism; money matters; set policy in the world not in a model; abandon point forecasts and finally understand the real equilibrium or disequilibrium of the economy

Keywords

Monetary policy committeecentral bank independenceinflation targetsmonatary targetsexchange rate targets
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Chapter
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Reflections on Monetary Policy after 25 Years of the MPC , pp. 161 - 168
Publisher: Cambridge University Press
Print publication year: 2024

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  • The MPC
  • Edited by Sean Holly, University of Cambridge, Michael McMahon, University of Oxford, Stephen Millard, National Institute of Economic and Social Research, Anna Watson, University of Cambridge
  • Book: Reflections on Monetary Policy after 25 Years of the MPC
  • Online publication: 14 November 2024
  • Chapter DOI: https://doi.org/10.1017/9781009471886.013
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  • The MPC
  • Edited by Sean Holly, University of Cambridge, Michael McMahon, University of Oxford, Stephen Millard, National Institute of Economic and Social Research, Anna Watson, University of Cambridge
  • Book: Reflections on Monetary Policy after 25 Years of the MPC
  • Online publication: 14 November 2024
  • Chapter DOI: https://doi.org/10.1017/9781009471886.013
Available formats
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Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

  • The MPC
  • Edited by Sean Holly, University of Cambridge, Michael McMahon, University of Oxford, Stephen Millard, National Institute of Economic and Social Research, Anna Watson, University of Cambridge
  • Book: Reflections on Monetary Policy after 25 Years of the MPC
  • Online publication: 14 November 2024
  • Chapter DOI: https://doi.org/10.1017/9781009471886.013
Available formats
×