are made once a year in the spring budget. in the uk, coordination between monetary and fiscal policy works well. 4. conclusions in conclusion, therefore, i do not offer any simple solutions to the imbalances between different parts of the british economy. fiscal policy is not an alternative to the month - by - month determination of monetary policy. and interest rates cannot target both inflation and asset prices, whether the exchange rate or share prices or house prices. nor should they. interest rates must focus on the economy - wide inflation target. but macroeconomic stability benefits all sectors of the economy. that stability, upon which the aspirations of parliamentarians, both at westminster and in edinburgh, depend, is fundamental to the future prosperity of the united kingdom. and to maintain stability, interest rates will sometimes go down and sometimes go up. for a quarter of a century, my generation – the inflation generation – suffered from the instability created by high and unpredictable inflation. to the next generation, i would like the prime minister, whoever he or she is at that point, to be able to say, “ you ’ ve never had it so stable, not just for one year, or two years, or even three, but for a whole generation. ” it is well known that many, if not most, of the great british economists were scottish. one of the few english economists to rival the scots was john maynard keynes. his view was that, “ if economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid! ”. so perhaps the fate of the mpc is, rather like dentists, to perform an important service but one which does not make people happy. regular monitoring and early treatment, while rarely pleasurable, prevent more unpleasant symptoms later. so it is with a pre - emptive monetary policy. as we said in our press release in september, an early move in interest rates “ could lower the level at which interest rates might otherwise need to be set ”. that is why we raised interest rates last month and why the mpc is committed to the consistent pursuit of a symmetric inflation target. but that is not all. the new monetary policy regime is probably the most transparent and open in the world. we are committed to explaining our policy – both to improve the efficiency of monetary policy itself and also to build up support for what we are doing. try going onto the bank of england ’ s website – the address is www

the greater stability of both inflation and output. there are three key elements in the regime. first, there is a clear and unambiguous objective for monetary policy – an inflation target of 2½ % – set by the government. second, decisions on interest rates are taken each month by the monetary policy committee ( mpc ) comprised of nine individuals with expertise in monetary policy – five executive members of the bank and four non - executives – who operate on the basis of one person, one vote. there is, therefore, an appropriate division between the objectives of monetary policy, which are set by the democratically elected government, and the implementation of those objectives, which is delegated to a group chosen for their expertise. the third, and crucial, component of the regime is that the monetary policy process is characterised by a high degree of transparency and openness. minutes of the mpc meetings are published within two weeks and the bank ’ s quarterly inflation reports contain the committee ’ s views on the outlook for inflation and output. it is important that the monetary policy committee explain its decisions, not least to make future decisions as predictable as possible in the light of the evolving economic data. of course, it is always easier to explain policy when the decisions are popular. we have to redouble our efforts when decisions are less popular, and so i am delighted to have an opportunity this evening to explain and to listen. i shall leave plenty of time for questions because one of the purposes of visits such as these is to see things from your perspective. as rabbie burns wrote, “ o wad some pow ’ r the giftie gie us to see oursels as others see us! ” the real test of the mpc is whether it aims continuously to meet the inflation target. for that reason, the monetary policy committee must be setting a policy for all seasons. some of you may say that it is all very well to set a policy for all seasons, but what about a policy for all regions, or parts of the uk? many critics disapproved of the recent increase in interest rates. indeed, the scottish council development and industry ( scdi ) itself described the decision as “ disappointing ”. it also described the rise as “ premature ” ; we would describe it as pre - emptive : prompt action to head off inflationary pressures in the future and so lower the level at which interest rates might otherwise need to be set. the scdi said that “ scottish business is regaining