Mr Brash addresses the question of inflation targeting: is New Zealand's experience relevant to
developing countries?
Text of the sixth L K Jha Memorial Lecture given by the Governor of the Reserve Bank of New
Zealand, Dr Donald T Brash, in Mumbai on 17 June 1999.
Introduction
Mr Governor, Ladies and Gentlemen,
I am deeply honoured to have been invited to give this sixth Memorial Lecture in memory of Shri L K
Jha.
I never had the privilege of meeting L K Jha, although I did visit India in the late 1960s when he was
Governor of the Reserve Bank of India and I was a staff member of the Commission on International
Development - better known as the Pearson Commission. But from all that I have read of him he was
one of India's most distinguished sons - an economist of distinction, a Governor of the Reserve Bank
of India, a distinguished diplomat, a respected leader in the Indian Civil Service, the Deputy
Chairman of the Brandt Commission, Chairman of the General Agreement on Tariffs and Trade in the
late 1950s, Governor of Jammu and Kashmir, and so much more. He was, too, an ardent supporter of
liberalisation, and had no doubt that, in the long run, it would improve the competitiveness of the
Indian economy to the benefit of the Indian people. He would, I am sure, have been an enthusiastic
supporter of many of the changes in India's economy in recent years, while no doubt urging a still
faster rate of progress.
I am also honoured to have been invited to give this Lecture by my good friend, Dr Bimal Jalan. I
mentioned a moment ago that, in the late 1960s, when L K Jha was Governor of the Reserve Bank of
India, I was a staff member of the Pearson Commission. Dr Bimal Jalan was also a staff member of
the Commission at that time. And since there were only 13 of us on the staff in total, Dr Jalan and I
got to know each other very well. I developed a very healthy respect for him, and indeed a strong
friendship with him, at that time. Our paths have diverged in the years since then, and it is for this
reason a particular pleasure to be here in Mumbai at a time when he has assumed the enormous
responsibility of guiding India's central bank.
The Governor has suggested that I talk today about inflation targeting in New Zealand, and in
particular comment on whether New Zealand's experience with inflation targeting might be of
relevance to developing countries. I am delighted to do that. But let me say at the very beginning that,
while New Zealand's experience with inflation targeting has, I believe, been a positive one, I do not
want to lecture you, or developing countries more generally, about what is best for you or other
developing countries. Every country has circumstances and traditions which are a little different and,
while I believe that inflation targeting is an approach to monetary policy formulation which deserves
serious consideration, the ultimate decision about how best to run monetary policy must obviously be
made by each country in the light of their circumstances and traditions.
The background to New Zealand's move to explicit inflation targeting
To understand why we in New Zealand moved to inflation targeting, it is worth recalling some of the
history. It has some similarities to the experiences of other countries recently.
Prior to the mid-1980s, the Reserve Bank of New Zealand was closely modelled on the Bank of
England. We provided advice to the Minister of Finance, but the day-to-day decisions on monetary
policy were made by him. The legislation under which we operated required us, in formulating our
advice, to have regard for the inflation rate, employment, growth, and a range of other good things.
And the result? We never experienced hyper-inflation, but we did have one of the worst inflation rates
among OECD countries (above 10 per cent per annum for more than a decade). Importantly for the
subsequent political recognition that such inflation did not enable us to grow any faster, our growth
rate was the lowest in the OECD. Monetary policy followed a cycle which looked suspiciously like
the three-yearly election cycle. And in 1984, the whole business culminated in a foreign exchange
crisis which looks in retrospect remarkably like some of those experienced in East Asia in recent
times - where the previously-pegged exchange rate came under huge pressure and eventually gave
way. The economic damage inflicted by that crisis on the balance sheets of banks and corporates was
relatively mild compared with the damage which has been sustained in, say, Thailand or Indonesia,
but that was partly because the Government itself had, through the Reserve Bank, sold a lot of
forward exchange contracts. Honouring those contracts was very expensive for New Zealand
taxpayers.
So what to do then? Initially, we devalued and began freeing up the financial sector. In March 1985,
we floated the New Zealand dollar with the explicit objective of enabling monetary policy to focus on
the single objective of reducing inflation, without having that objective complicated by concerns for
maintaining a fixed exchange rate. While still formally simply advisers to the Minister of Finance, the
Reserve Bank was given clear instructions by the Minister that we now had the single objective of
achieving price stability, and that he had no interest in knowing the mechanics of how we achieved it.
We were given de facto independence.
Not long afterwards, the Minister asked the Bank to suggest ways in which it might be possible to
change the legislative framework in order to prevent the cynical manipulation of monetary policy for
short-term political objectives by any future government. So we set about studying the literature on
central banking, and examining the relationship between governments and central banks in other parts
of the world.
The 1989 Act
What emerged from this study was the Reserve Bank of New Zealand Act 1989, which became law on
1 February 1990. It was based on six principles:
• Monetary policy does affect the inflation rate, but can not successfully be used to engineer a
sustainably higher rate of economic growth or a sustainably higher level of employment. This
principle was absolutely fundamental, and of course was totally at variance with the
assumption underlying previous legislation. It was at variance also with much of the post-war
orthodoxy, which assumed that there was an enduring trade-off between inflation on the one
hand and employment and growth on the other, that countries could choose to have low
inflation with high unemployment or, more likely, could choose to have a bit more inflation in
the interests of getting a bit more growth. (This view had been deeply entrenched in New
Zealand, perhaps because the economist whose name is often, unfairly, associated with this
belief, Bill Phillips, was New Zealand's best known economist.) But it was clear well before
our legislation was passed that there is no such enduring trade-off, that, in the jargon, the
long-run Phillips curve is vertical. Our own experience prior to 1984 - of high inflation and
very poor growth - demonstrated the point conclusively.
• Secondly, in these circumstances, where there is no enduring trade-off between inflation and
growth, the most sensible inflation rate for monetary policy to target is price stability. By
1989, quite a lot of empirical work had already been done in a variety of countries which
suggested that high inflation was damaging to economic performance, and that low inflation,
or price stability, was beneficial. We did not have the benefit of some of the recent studies of
course, debating the relative merits of price stability and 'low but positive' inflation rates
(often associated with the names of economists such as Paul Krugman, and Akerlof, Dickens,
and Perry). But price stability in some sense seemed the appropriate goal, and the 1989 Act
makes the Bank responsible for using monetary policy for the single objective of 'achieving
and maintaining stability in the general level of prices'.
• Thirdly, in a democratic society, it is appropriate that the elected government have an explicit
role in defining what 'price stability' means, and the speed at which it should be achieved.
This seemed to follow from the fact that, while there is no long-term trade-off between
inflation and growth, there is clearly a trade-off in the short-term. Hence, the 1989 Act
required there to be a written agreement, a Policy Targets Agreement, between the Minister of
Finance and the Governor of the Bank, signed on the appointment or re-appointment of the
Governor, giving specific content to 'stability in the general level of prices'. This gave
government an explicit role in defining the objective of monetary policy, subject to the need
to have that objective consistent with some reasonable interpretation of the statutory objective
of 'stability in the general level of prices'. Moreover, the Act provided that the Policy Targets
Agreement could be changed during the course of a Governor's term of office by mutual
agreement of the Minister and the Governor. Indeed, where Minister and Governor can not
agree, the Act provides for an 'over-ride' whereby, if the government feels circumstances
warrant the complete abandonment of the price stability objective, the Policy Targets
Agreement can be set aside, by the unilateral decision of the government, for a period of 12
months. The first Policy Targets Agreement defined our target as inflation of between 0 and 2
per cent annually, as measured by the CPI, achieved before the end of 1992.1
The fourth principle on which the 1989 Act was built was based on the observed fact that,
•
internationally, central banks which are independent of political control seem to do a very
much better job of keeping inflation low than do central banks which are subject to political
direction. So the Act provides that, once the Policy Targets Agreement between Minister and
Governor has been signed, the Governor should be entirely independent in the formulation
and implementation of monetary policy. The Governor has absolutely no obligation to consult
with the Minister, with the Treasury, or indeed with the Board of the Bank. Note that the
combination of these two principles - of political involvement in the definition of the
objective of monetary policy but complete independence on how that objective is achieved
made the New Zealand approach internationally unique at that time. We were neither to enjoy
the complete independence of the Federal Reserve or the Bundesbank nor to suffer the
complete political subservience of the Bank of England (at that time) or of our own history. A
clear distinction was made between goal independence and instrument independence - we had
the latter but not the former.
• But, fifthly, it was taken as axiomatic that, with total instrument independence should go
accountability, and the 1989 Act required that in two main ways. First, the Governor was
required to provide a comprehensive report to Parliament at least six-monthly, explaining how
he saw the inflation situation and how monetary policy would be conducted to ensure that
1
It is not entirely clear where our original target of 0 to 2 per cent annual inflation came from. It has
been said that its source was a capricious remark by the Minister of Finance who, when confronted by
journalists wanting to know whether he was 'finally satisfied' that price stability had been achieved
when the CPI first fell below 10 per cent, responded that 'No, I'm aiming at genuine price stability -
you know, something like 0 to 2 per cent'. That may or may not be true, but it is certainly clear that
well before the 1989 legislation was passed, in early 1988, the Minister was publicly espousing a target
of 0 to 2 per cent inflation as the Reserve Bank's only monetary policy objective. By 1989, the Bank's
Annual Report referred to our objective of achieving such an inflation rate no later than the end of
1992. By then, the target was not the capricious observation of the Minister of Finance but a
welljustified definition of price stability in a situation where we suspected measurement bias in the CPI of
about 1 per cent; in other words, 0 to 2 per cent was regarded as 'genuine price stability plus or minus 1
per cent'.
price stability was maintained. (We now produce these so-called Monetary Policy Statements
four times a year, and I am examined on them on almost every occasion by the Finance and
Expenditure Committee of Parliament.) Secondly, the Act provided that the Governor can be
dismissed for all the usual reasons (bankruptcy, criminal conviction, insanity, and so on) and
for 'inadequate performance' in meeting the terms of the Policy Targets Agreement. The Act
does not provide that I am dismissed automatically for the slightest breach of the inflation
target, but the threat of dismissal for breaching the target certainly focuses the mind!
(Incidentally, as already mentioned, the Policy Targets Agreement is between the Minister
and the Governor, not between the Minister and the Bank, and it is the Governor who has
decision-making freedom not, technically, the Bank. And that was quite deliberate. When I
questioned the Minister on this when the legislation was being drafted, he replied 'We can't
fire the Bank. We can't even realistically fire the whole Board. But we sure as hell can fire
you!')
• Finally, the 1989 Act mandated a very high level of transparency. The Act transparently
requires that monetary policy be focused on the single objective of achieving and maintaining
stability in the general level of prices. The Act transparently requires that the Minister and
Governor agree a Policy Targets Agreement, and that that Agreement immediately be made
public. The Act transparently requires that any change to the Policy Targets Agreement be
made public immediately, whether agreed by Minister and Governor or arising from the
'over-ride provision'. The Act transparently requires the Governor to report to Parliament on
a regular basis. And it is almost impossible to overstate the importance of this transparency. It
is this above all which prevents the cynical manipulation of monetary policy for political
ends. The Act explicitly allows the inflation target to be modified provided the government is
willing to tell the public that that is being done. The obligation to tell the public about any
change in the target effectively means that monetary policy can not be used for political ends,
because monetary policy achieves short-term increases in economic activity largely by
producing surprise inflation. It is hard to see what political gain would be achieved by a
government which announced, in an election year, that the inflation target was to be increased
to, say, 5 to 8 per cent. The effect on interest rates and the exchange rate would not be
conducive to winning votes!
The results
So that was the framework established by the 1989 Act, and we have now completed more than one
full business cycle within that framework. Looking back from the experience of a decade, I believe it
has served us very well. It clearly makes sense to focus monetary policy on delivering price stability.
It clearly makes sense in my view to give the elected government a say in defining what price stability
should mean during the Governor's term of office. It makes sense to make the Governor or the Bank
independent to make the technical judgements on how to deliver the agreed objective. It makes sense
to hold the Bank or the Governor accountable for the outcomes. And it certainly makes sense that
both the objectives and the modus operandi of policy are clearly understood by the public and
financial markets.
It is not possible, of course, to be dogmatic about the contribution which this framework has made to
the reduction of inflation in New Zealand. Many other countries have also maintained inflation at
very low levels during the 1990s. Nobody can be sure how inflation would have evolved in New
Zealand without the framework established by that Act. Some academic commentators have pointed
out that inflation was already falling quite strongly before the 1989 Act was enacted.
But in my own view, the framework was of major benefit in the New Zealand context, where we had
had two decades of very poor inflation performance. Yes, inflation was falling quite strongly prior to
the 1989 Act becoming law on 1 February 1990, but of course the Bank had been acting under
instructions from the Minister to focus exclusively on reducing inflation since at least 1985, and to
focus on achieving a 0 to 2 per cent target since April 1988. We had also enjoyed complete
operational independence since the mid-1980s. Little wonder, then, that inflation was falling: de
facto, we had had an explicit inflation-targeting regime several years before the 1989 law was passed
in December of that year.
As Figure 1 above illustrates, inflation as measured by the CPI (excluding the estimated impact of our
Goods and Services Tax and of interest rates, which in New Zealand are still included in the CPI) fell
steadily in the late 1980s, and reached the inflation target by the end of 1991. The graph also shows
what until late 1997 we referred to as 'underlying inflation', which was short-hand for the measure of
Policy Targets Agreement
inflation consistent with the intention of the (which permits us to disregard
price shocks arising from certain changes in indirect taxation, significant changes in the terms of
trade, changes in mortgage rates, and so on). That measure of inflation remained consistently within
the then 0 to 2 per cent target from 1991 until June 1995, despite economic growth in 1993-95 which,
by New Zealand standards, was exceptionally high. We exceeded the inflation target by 0.2 per cent
in the year to June 1995, in part because of a very sharp spike in the prices of fruit and vegetables,
returned to the target for the next six months, and then exceeded the target by a small margin
throughout 1996. Our target was changed, by mutual agreement, to 0 to 3 per cent in December 1996,
and in the year to March 1999 CPI inflation excluding interest rates was slightly below the middle of
our target (at 1.0 per cent). So for more than eight years consumer price inflation has been within a
range of 0 to 3 per cent, and for most of that time it has in fact been below 2 per cent.
I believe that the framework established by the 1989 Act has also played a useful role in reducing
inflationary expectations in New Zealand. Again, it is difficult to prove this point because nobody
knows how inflationary expectations would have evolved in the absence of the Act. But I believe it
helped increase the credibility of the Bank's commitment to low inflation that it was widely
understood that I ran a serious risk of losing my job if inflation fell outside the agreed and
publiclyrecognised inflation target. On each of the occasions in 1995 and 1996 when inflation slightly
exceeded the 0 to 2 per cent target (and at its highest the excess was only 0.4 per cent), the Minister of
Finance formally wrote to the non-executive Directors of the Bank asking them whether they felt my
performance under the terms of the Policy Targets Agreement had been adequate. Both the letters
from the Minister and the replies from the Directors of the Bank were made public, and everybody
understood what was at stake.
In late 1990, not many months after the 1989 Act became law, the head of the New Zealand Council
of Trade Unions wrote an article which appeared in one of the major newspapers2. The article argued
that the Reserve Bank was focused on an undesirably narrow inflation objective, but that, as long as
that was the case, unions would need to moderate wage demands to avoid increases in unemployment.
In the weeks which followed, he actively, and with very considerable courage, campaigned for
moderate wage settlements as a way of reducing unemployment. I myself have little doubt that the
Reserve Bank Act played a part in encouraging employers and unions to adjust their wage settlements
to levels which were quite quickly consistent with the inflation target.
The same sort of effect on inflationary expectations was visible in financial markets. As Figure 2
shows, in early 1986 the yield on New Zealand government New Zealand dollar 10 year bonds was
roughly 1000 basis points above the yield on US Treasuries. By early 1990, that margin had
contracted to about 400 basis points. By early 1994, the yield on the New Zealand government
securities was marginally below that on US Treasuries. In the last few years, the yield on New
Zealand 10 year bonds has typically been a little higher than on US Treasuries, but the margin looks
trivial in relation to that in the mid-1980s.
Another of the interesting by-products of the inflation-targeting regime has, I believe, been some
stabilisation of the New Zealand dollar exchange rate. I don't want to overstate this: the New Zealand
dollar has been through some pretty big swings in recent years. Against the US dollar, we appreciated
by nearly 40 per cent between the beginning of 1993 and the beginning of 1997; and then we lost all
of that appreciation (which means that we declined in percentage terms by nearly 30 per cent) over
the next 18 months. But on a day-to-day and week-to-week basis, fluctuations in the New Zealand
exchange rate have been rather less than those experienced by many other floating currencies - and
this in a situation where the Reserve Bank has not intervened in the foreign exchange market for more
than 14 years (since we floated in March 1985).
Why is this? I think it is because financial markets understand that, with a very explicit inflation
target, there is a limit to how much movement we will accept in the exchange rate before we look to
see some offsetting change in interest rates. No, we do not have an exchange rate target. We have an
inflation target. But in a small open economy such as ours, no central bank with a commitment to low
inflation can be indifferent to major movements in the exchange rate.
This is because the exchange rate has important direct and indirect influence over prices. Most
importantly, a change in the exchange rate alters the demand for locally-produced goods and services,
thereby altering domestic inflation pressures. Of course, the difficulty for a central bank is to know
exactly why the exchange rate changes. This has important implications for the appropriate monetary
policy response. Thus, if a sharp movement in the exchange rate seems to be related to, say, an
adverse development in our external markets, as has been the case over much of the last two years,
then we may judge that the adverse external development will have sufficient disinflationary impact
on the economy to offset the inflationary impact of an exchange rate depreciation, so that no
offsetting increase in interest rates is necessary. Conversely, if the exchange rate change simply
reflects some shift in investor preferences, with no justification in the real economy, then inflation
pressures will have changed, and some adjustment in monetary policy will normally be appropriate.
A fourth contribution of the framework established by the 1989 Act was, I think it is fair to say, an
improvement in fiscal policy. Again, I don't want to overstate this point: there were a number of
factors driving an improvement in New Zealand's previously rather poor record of fiscal performance,
including some very determined Ministers of Finance. But the monetary policy framework played a
useful part. This first became apparent in 1990 when the then-Government introduced an
expansionary Budget not long before the general election that year. We judged that that degree of
fiscal stimulus would require us to tighten monetary policy somewhat if inflation (then running at
over 5 per cent) was to be brought down to the 0 to 2 per cent target by 1992; so we did. Immediately,
an editorial in New Zealand's largest daily paper noted that the Budget had 'rekindled inflationary
expectations. The (Reserve Bank) was bound to lift interest rates.... Electors are frequently bribed to
their ultimate cost. This time the independence of responsible monetary control quickly exposes a
fiscal fraud.'3 The main Opposition party campaigned in the election on a commitment to get interest
rates reduced, not by leaning on the central bank but by 'giving monetary policy some mates' through
tighter fiscal policy and deregulation of the labour market.
Five years later, with several years of fiscal surplus behind it, the Government undertook to reduce
income taxes subject to several conditions, one of which was that the Reserve Bank was satisfied that
such tax cuts would not require a significant tightening of monetary policy.
To me, this is a good illustration of the benefit of having the precise specification of the objective of
monetary policy a matter for formal and public agreement between Government and Bank. The
Government makes a public commitment to the agreed inflation objective. It implicitly accepts that, if
its fiscal policy increases inflationary pressures, the Bank will need to tighten monetary policy to
ensure that the agreed objective is met. The Bank is protected from political pressure to ease monetary
policy as long as the inflation rate is, and looks likely to remain, above the bottom of the inflation
target range.
In contrast to these positive benefits from the 1989 Act, some people have noted that in the early
1990s New Zealand also saw quite a strong increase in unemployment and a downturn in output, and
have suggested that the Reserve Bank must accept the blame for that.
I know of no cases internationally where inflation has been reduced from a relatively high level to a
very low level without some temporary adverse impact on employment and output, and New
Zealand's experience was no different. Indeed, I have often acknowledged that the process of
reducing inflation from a high level to a low level almost certainly had the effect of temporarily
reducing employment and output. But I certainly am not willing to accept that the process of reducing
inflation was the only factor in reducing employment and output in New Zealand in the early 1990s,
since a great many other policies had also been changed at about that time. While most of those other
policy changes were highly desirable in the interests of the long-term growth of the New Zealand
economy - reductions in protection against imports, reductions in subsidies for exports, privatisation
and rationalisation of many heavily over-staffed government trading operations, for example - many
of them also had adverse short-term impacts on employment and output. For this reason, attempts to
calculate the 'sacrifice ratio' involved in reducing inflation in New Zealand are almost inevitably
doomed to failure.
What we know is that employment and output both fell at the beginning of the 1990s. What we
acknowledge is that the process of reducing inflation was a part of the reason for that. What we do not
accept is that monetary policy was the only factor in that outcome. Moreover, as theory suggested
would be the case, once wage- and price-setting behaviour adjusted to the new, low, level of inflation,
employment and output both recovered quite quickly, with unemployment declining from almost 11
per cent in 1991 to 6 per cent in 1996. In other words, the increase in unemployment was a result of
the process of reducing inflation from a high level to a low level, not a result of maintaining inflation
at a low level. While unemployment has recently risen to over 7 per cent of the work-force, it remains
well below its 1992 peak, and well below that in most of the countries of Europe, notwithstanding the
impact on production and exports of the Asian crisis and two successive years of drought. We are
confident that, provided inflation expectations remain broadly consistent with the inflation target, low
inflation can be maintained without any ongoing cost in terms of employment or output.
Interestingly, a recent paper produced by the IMF4 suggests that inflation-targeting countries as a
group have recently improved their rate of economic growth compared to countries which are not
inflation-targeters. Certainly, New Zealand's growth performance relative to other OECD countries
has been markedly better in the 1990s than in the previous two decades, although given all the other
economic reforms which took place in New Zealand in the late 1980s and early 1990s it would
certainly be inappropriate to attribute that improved growth performance primarily to the inflation
targeting regime.
As an aside, it is perhaps worth stressing what has come as something of a surprise to some people in
New Zealand and that is that our inflation range has both a top and a bottom. One of our central
banking colleagues once said to me that he thought that any fool could get inflation below 2 per cent
by simply keeping monetary policy tight at all times. I agreed. But that is assuredly not the way we
see inflation targeting, and of course it is not the way our inflation target is specified. Our obligation,
currently, is to keep inflation below 3 per cent and above zero. I would not expect to be dismissed the
instant inflation fell below zero, any more than I was dismissed when there was a small breach of the
top of the target. Indeed, the Policy Targets Agreement recognises that there may be quite legitimate
reasons why inflation may, on occasions, move outside the 0 to 3 per cent target range. But there
would certainly be questions asked if inflation fell below zero, and I would need to have a good
explanation of that outcome. We began easing monetary policy in December 1996 - and eased
aggressively throughout 1998 - precisely because we take the bottom of the target as seriously as we
take the top.
The formulation of monetary policy
Let me talk briefly about the actual achievement of the agreed inflation target, about the formulation
of monetary policy. Does an inflation-targeting framework help in the actual delivery of price
stability? I think it does, in three ways.
First, having an explicit inflation target is useful in anchoring inflation expectations and thus affecting
wage- and price-setting behaviour. I have already mentioned that in the discussion of the results of the
adoption of the new framework. We in the Reserve Bank devote a very considerable amount of energy
to explaining what we are doing and why, not just to the financial markets but to the public more
widely - groups of farmers, manufacturers, Rotarians, teachers, lawyers, anybody who will listen. I
myself do more than 100 speeches all over the country in an average year, and my colleagues do a
great many also. Perhaps six or eight of these speeches will be on-the-record, and these we will post
to an extensive mailing list of Parliamentarians, business executives, school teachers, and so on. We
produce our quarterly Monetary Policy Statements, and a series of brochures and pamphlets, many of
them written in question-and-answer format, designed to deal with the monetary policy issues of
greatest concern to the public. We have an Internet site, quite comprehensive and regularly updated,
receiving over 20,000 hits per week at this stage. All of this communications work is designed to
strengthen the credibility of the inflation target and thus both to increase the likelihood of achieving
the target and to minimise any social cost in doing so.
Secondly, having an explicit inflation target provides a very useful discipline on the Reserve Bank
itself, and helps considerably in keeping our deliberations focused. I have been at the Bank for little
more than 10 years, during all of which time we have had an inflation target. But I am told by those of
my colleagues who remember the days before we had an explicit inflation target that prior to the
introduction of that target monetary policy discussions, and decisions, were very much more difficult.
Those making the decisions and expressing the opinions often had a range of spoken and unspoken
objectives in mind, some of them consistent and some of them inconsistent. Dr Mervyn King, Deputy
Governor of the Bank of England, has reported the same change in discussions at the Bank of
England. With a clear directive from the British Government to keep inflation as close as possible to
2.5 per cent, the members of the Bank of England's Monetary Policy Committee focus on that
objective. It matters not whether the Committee members are 'doves' or 'hawks'. Indeed, the terms
have no meaning in the context of an inflation target agreed with government. The centra