Monetary policy at the Bank of England
The objectives of monetary policy
The Bank’s Monetary Policy Committee (MPC) sets monetary policy to keep inflation low and stable, which supports growth and jobs. Subject to maintaining price stability, the MPC is also required to support the Government’s economic policy.
The Government has set the MPC a target for the 12-month increase in the Consumer Prices Index of 2%.
The 2% inflation target is symmetric and applies at all times.
The MPC’s remit recognises, however, that the actual inflation rate will depart from its target as a result of shocks and disturbances, and that attempts to keep inflation at target in these circumstances may cause undesirable volatility in output. In exceptional circumstances, the appropriate horizon for returning inflation to target can vary. The MPC will
communicate how and when it intends to return inflation to the target.
The instruments of monetary policy
The MPC currently uses two main monetary policy tools. First, we set the interest rate that banks and building societies earn on deposits, or ‘reserves’, placed with the Bank of England – this is Bank Rate. Second, we can buy government and corporate bonds, financed by the issuance of central bank reserves – this is asset purchases or quantitative easing.
The Monetary Policy Report
The MPC is committed to clear, transparent communication. The Monetary Policy Report (MPR) is a key part of that. It allows the MPC to share its thinking and explain the reasons for its decisions.
The Report is produced quarterly by Bank staff under the guidance of the members of the MPC.
This Report has been prepared and published by the Bank of England in accordance with section 18 of the Bank of England Act 1998.
Monetary Policy Reports 2021