Central Bank Independence and the Conduct of Monetary Policy in the United Kingdom

Hossein Samiei and Jan Martijn

No 1999/170, IMF Working Papers from International Monetary Fund

Abstract: The U.K. monetary policy framework, which combines inflation targeting with operational independence, provides a suitable arrangement for focused and credible monetary policy. However, potential weaknesses could result from features that have not yet been fully tested: the credibility and transparency of the inflation forecasts, which form the core of policy decisions, have diminished as a result of independence; and the framework could encourage excessive activism and frequent changes in interest rates. Although policy coordination could also suffer from independence, the new partly rules-based fiscal and monetary regimes will promote overall macroeconomic stability.

Keywords: WP; monetary policy; interest rate; central bank; inflation target; Inflation targeting; central bank independence; United Kingdom; policy coordination; monetary policy decision; instrument independence; gradualist monetary policy; U.K. government; interest rate expectation; interest rate decrease; interest rate projection; interest rate trend; monetary policy decision making; MPC behavior; stabilizing monetary policy response; Inflation; Central bank autonomy; Monetary policy frameworks (search for similar items in EconPapers)
Pages: 22
Date: 1999-12-01
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Citations: View citations in EconPapers (16)

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