Month: January 2025

The Bank of England’s statutory monetary policy objectives: a historical and legal account

Michael Salib and Mesha Ghazaleh

The Bank’s monetary policy objectives are some of the most significant objectives bestowed by Parliament on any UK public authority. They are to maintain price stability and, subject to that, support the Government’s economic policy, including its objectives for growth and employment. In our paper we offer a historical and legal account of the Bank’s monetary policy objectives by looking at their origins, the parliamentary debates around their wording and their interpretation in practice. Since being introduced in 1998, our paper finds that they have proved remarkably resilient in directing the Bank’s monetary response over the past 25 years, partly due to the in-built flexibility in their wording. 

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Shaping inflation expectations: the effects of monetary policy

Natalie Burr

In economic theory, expectations of future inflation are an important determinant of inflation, making them a key variable of interest for monetary policy makers. But is there empirical evidence to suggest monetary policy can help determine inflation expectations? I answer this question in a recent paper by applying a Bayesian proxy vector autoregression (BVAR) model to summary measures of inflation expectations for households, firms, professional forecasters and financial markets, derived using principal component analysis (PCA). I find that median inflation expectations respond to contractionary monetary policy, with heterogeneity across groups: financial markets and firms’ expectations fall, while households’ expectations rise. I also document that monetary policy shocks reduce the dispersion of expectations in the 12–18 months following a shock.

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Launch of the 2025–28 Bank of England Agenda for Research

Misa Tanaka

Today the Bank published the 2025–28 ‘Bank of England Agenda for Research’ setting out the key areas for new research over the coming years and a set of priority topics for 2025.

Misa Tanaka works in the Bank’s Research Hub and is the Bank’s Head of Research.

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