Inflation targets

UK

• Bank of England monetary policy comitteee sets interest rates with a view to meeting the inflation target over the next two years
• the governor of the bank had to write an open letter to the chancellor explaning the reasons for the inflation under/over shoot
• MPC take steps to bring inflation within the target zone again

ADVANTAGES OF AN INFLATION TARGET

• reduce inflationary expectations
• ppl will demand lower wage rises if they believe that there will be…