Some Current Issues in UK Monetary Policy

Abstract

In this speech, Charles Bean, Chief Economist and member of the Monetary Policy Committee, notes that the increase in gross household debt has been primarily associated with asset accumulation rather than borrowing in order to finance consumption, and is largely a by-product of developments in the housing market. Any impact of debt on the macroeconomic outlook thus depends on differences in the behaviour of lenders and borrowers. He goes on to discuss the Inflation Report projections for inflation and growth which the MPC uses to make and explain its decisions. He argues that, if interest rates are a long way from "normal", forecasts for inflation and growth assuming that rates follow a path implied by the financial markets provide a more useful picture of economic prospects than assuming interest rates remain constant.