BoE's Pill: "I stand ready to act – if necessary – to contain the lasting components of any new inflationary pressures so as to deliver on the MPC’s price stability mandate over the medium term"
Importance
Level 1
- "The fog of uncertainty in which we always operate cannot be an excuse for inaction. Uncertainty is always present (perhaps especially so of late), but the task of monetary policy makers is to provide clarity on their pursuit of the price stability objective in that uncertain world."
- "...given the lags in monetary policy transmission and the immediacy with which direct and indirect effects influence CPI inflation, there are limits to what the MPC can do to dampen volatility arising through these channels at shorter horizons."
- "I see the upside risks to price stability mounting as a result of events in the Gulf."
- MPC is focused on second-round effects.
- "Using the language of the Bayesian approach, I attach sufficient weight to the ‘structural change’ interpretation to conclude that propagation of both previous inflationary shocks and the new energy shock emanating from the Gulf is persistent enough to justify “caution” in the conduct of monetary policy."
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