BIS central bankers’ speeches  7  References Broadbent, Ben (2012), “Productivity and the allocation of resources”, speech given at Durham Business School, available at: http://www.bankofengland.co.uk/publications/Pages/speeches/2012/599.aspx Cairncross, Sir Alexander and Cairncross, Frances (1992): “The Legacy of the golden age: the 1960s and their economic consequences” (Routledge) Chancellor of the Exchequer (2012): Letter to the Governor of the Bank of England, reaffirming the remit of the MPC, available at: http://www.hmtreasury.gov.uk/d/open_letter_from_chx_to_boe_22032011.pdf Furceri, D and Mouragane, A (2009), “The effect of financial crises on potential output: new empirical evidence from OECD countries”. OECD Economics Department Working Papers no. 699. George, Lord Edward (1999): “Annual Cornwall Lecture”, available at: www.bankofengland.co.uk/publications/Pages/.../1999/speech62.aspx King, Sir Mervyn (1997), “Inflation targeting 5 years on”, speech given at the London School of Economics, available at: www.bankofengland.co.uk/publications/speeches/1997/speech09.pdf King, Sir Mervyn (1997), “Changes in UK monetary policy: Rules and discretion in practice”, Journal of Monetary Economics, Volume 39, Issue 1 (p81–97) King, Sir Mervyn (2004), “The institutions of monetary policy: the Ely Lecture 2004”, available at: http://www.bankofengland.co.uk/publications/Pages/speeches/2004/208.aspx King, Sir Mervyn (2012), remarks given at the Panel discussion on “Challenges for the Future”, Federal Reserve Board Conference “Central Banking: Before, During and After the Crisis”, available at: http://www.bankofengland.co.uk/publications/Documents/speeches/2012/speech556.pdf International Monetary Fund (2009), “What is the damage? Medium term output dynamics after financial crises”, World Economic Outlook, October, chapter 4, pages 121–151.

Most colourfully was the observation, again made by Mervyn King, that an inflation target does not compel policymakers to behave like “inflation nutters”: there is scope to care about stabilising output and employment as well as controlling inflation.3 That monetary policymakers should be concerned with the implications of their actions for the real economy – for the growth of output and for the strength of employment – must surely seem right to all of us. The late Eddie George – who, together with Mervyn King, perhaps did more than anyone to cement the importance at the Bank of England of low and stable inflation – stressed repeatedly that low inflation “is not an end in itself .... [it is] a necessary means to the end of sustainable growth of output and higher living standards”.4 It’s important that we don’t lose sight of this overriding aim. Eddie was equally clear that, in the long run, the best contribution that monetary policy could make to achieving a prosperous and vibrant economy was to deliver enduring price stability. He had seen at first hand the pernicious costs of the high and variable inflation of the 70s and 80s: companies and households unable to budget and plan efficiently; resources misallocated; long-term contracts avoided for fear that large swings in inflation would end up biting one party or the other. The value of hard-earned savings eroded.