Given the long and variable time lags between interest rate changes and responses in output and inflation, an inflation forecast must lie at the heart of monetary policy. In the UK the Bank's inflation forecast and Report were developed when the interest rate decision still lay with the Chancellor. Its, largely unchanged, continuation has led to certain tensions once that decision was delegated to a Monetary Policy Committee of independently responsible experts. In this paper the question is raised whether such a Committee should be jointly and individually responsible for the inflation forecast, and what might be considered as alternative procedures.
Monetary policy committee size and inflation volatility