Monetary policy in the UK

Monetary Policy Remit

The Bank of England Act 1998 requires the Treasury to specify at least once every 12 months how price stability should be defined and what the economic policy of the Government consists of. On 23 March 2011, the Chancellor wrote to the Governor of the Bank of England specifying the monetary policy remit.

Letter from the Chancellor of the Exchequer to the Governor of the Bank of England 22/03/11 (PDF 705KB)

Open letters

The remit for the Monetary Policy Committee (MPC) requires the Governor to write to the Chancellor if CPI inflation deviates from the 2 per cent target by more than one percentage point. The Governor’s letter should explain:

why inflation moved away from target;
the period within which the MPC expects inflation to return to target;
the policy action being taken to deal with it; and
how this approach meets the Government’s monetary policy objectives.

The remit requires a further letter after three months if inflation remains more than one percentage point above or below the target.

On 16 May 2011, the Governor wrote to the Chancellor about the CPI inflation rate for April 2011 of 4.5 per cent. The Chancellor replied on 17 May 2011.

On 14 February 2011, the Governor wrote to the Chancellor about the CPI inflation rate for January 2011 of 4.0 per cent. The Chancellor replied on 15 February 2011.

On 15 November 2010, the Governor wrote to the Chancellor about the CPI inflation rate for October 2010 of 3.2 per cent. The Chancellor replied on 16 November 2010.

CPI inflation in July 2010 remained above 3 per cent, prompting an open letter from the Governor to the Chancellor on 16 August 2010. The Chancellor replied to the Governor on the 17 August 2010.

On 17 May 2010, the Governor wrote to the Chancellor about CPI inflation for April 2010 being more than one percentage point above target. The Chancellor replied on 18 May 2010.

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