There is inevitably great uncertainty about both the timing and size of these effects. Research and analysis Research work published by the Bank is intended to contribute to debate, and is not necessarily a statement of Bank policy. This article examines and interprets movements in the yield curve at the time of changes in monetary policy. A perfectly transparent, fully credible monetary policy will insulate the yield curve from jumps at the time of monetary policy changes. Indeed, stability of the yield curve around the time of monetary policy changes provides one measure of the degree of transparency and credibility of a monetary regime.
Most monetary regimes are less than perfectly transparent and credible.
Typically, the yield curve does jump at the time of official rate changes. But evidence in the United Kingdom suggests that these yield-curve shifts have been dampened considerably since the introduction of inflation targeting and the transparency reforms that have accompanied it. Greater transparency has manifested itself in greater stability in the yield curve, especially at the short end. A central part of this task involves interpreting information about the current state of the UK economy, and assessing its medium-term prospects. Surveys form part of the broad range of information available to the MPC, along with official statistics, data from financial markets, and the information provided by the Bank's regional Agencies.