Book Report/Review
Health Sciences & Medicine
Pages 4 (1004 words)
Download 0
Chart 1 in the appendix shows how inflation levels have evolved over time since 1990. It is notable how inflation levels are lower and less volatile since the formation of the MPC in 1997. Table 1, which shows the mean and standard deviation of the CPI either side of 1997 demonstrates this even further.


Chart 2 shows that this has happened only 6 times since the MPC began controlling interest rates. In fact before 2007 there were no such occurrences. There are various other points worth noting to demonstrate the good performance of the MPC:
In the past decade, only Japan which has suffered from long period of deflation, has had lower average inflation than the UK, among the G7 economies . This contrasts the decade preceding that in which the UK had the second highest inflation rate in the G7.
UK interest rates have remained at an average of 5% since the MPC began compared to just over 9% in the previous economic cycle. This has subsequently allowed a long period of sustained low inflationary economic growth.
There are many references over the last decade in which they have reacted quickly to prevent inflation getting out of control. In fact, up till the middle of 1997, the MPC met 120 times and on 34 of such occasions, these meetings have resulted in a change of the base rate. It is clearly obvious to the general public, that the MPC change interest rates in response to economic events/outlook. The MPC has therefore reduced market expectations of inflation. ...
Download paper
Not exactly what you need?