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The inflation-targeting regime in the United Kingdom: a view from Threadneedle Street

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  • Spencer Dale
  • James Proudman
  • Peter Westaway

Abstract

The recent financial crisis and subsequent deterioration in macroeconomic outcomes have raised question marks over the framework for monetary policy in the United Kingdom. This paper examines the performance of the UK's monetary policy framework in the light of these questions. Far from concluding that inflation targeting needs to be replaced, we argue in the paper that the regime has provided a clear policy compass that facilitated strong and decisive monetary policy decisions during the financial crisis. We argue that it should remain the mainstay of the UK macroeconomic policy framework. Even so, lessons need to be learnt to prevent financial market excesses from destabilizing the economy in future: the single most important being the need to expand the range of instruments available to policy-makers. Copyright 2010, Oxford University Press.

Suggested Citation

  • Spencer Dale & James Proudman & Peter Westaway, 2010. "The inflation-targeting regime in the United Kingdom: a view from Threadneedle Street," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 26(1), pages 3-14, Spring.
    • Handle: RePEc:oup:oxford:v:26:y:2010:i:1:p:3-14
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    File URL: http://hdl.handle.net/10.1093/oxrep/grp033
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    Cited by:

    1. Kenneth Kuttner & Adam Posen, 2011. "How Flexible Can Inflation Targeting Be and Still Work?," Department of Economics Working Papers 2011-10, Department of Economics, Williams College, revised Sep 2011.
    2. Carbone, Jared C. & Gazzale, Robert S., 2017. "A shared sense of responsibility: Money versus effort contributions in the voluntary provision of public goods," Journal of Economic Behavior & Organization, Elsevier, vol. 139(C), pages 74-87.

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