. but that jump largely reflected the budget changes to excise duties which took effect earlier this year than last. that will drop out of the index in the third quarter of this year when rpix inflation is likely to fall back towards its target level of 2½ %. however, this relatively optimistic short - term outlook reflects an extraordinarily benign inflation environment. the combination of a strong exchange rate ( still about 25 % above its level of august 1996 ), a 20 % fall in dollar oil prices over the past year, and an average fall of 9. 5 % in other commodity prices, is holding down retail price inflation. domestically generated inflation is significantly higher than rpix inflation. as the one - off effects of the rise in sterling wear off over the course of the next year or so - as indeed they will unless sterling appreciates further - inflation will start to rise above the target unless domestically generated inflation declines. in the long run, domestically generated inflation is likely to be close to the rate of increase of unit labour costs. at present unit labour costs are rising at about 3½ % a year. the earnings figures released earlier this month - which showed that average earnings in the economy grew by 4. 9 % and in the private sector by no less than 5. 6 % - were undoubtedly disappointing. it is too soon to judge how far they reflect the impact of higher bonuses this year than last. in any event, to hit the inflation target those rates of earnings growth will have to fall back. these high levels of earnings growth are not the underlying cause of inflationary pressure ; they are a symptom of a tight labour market. equally, the prospects for earnings growth depend critically on the future path of output and on inflation expectations. the mpc ’ s central projection in the may inflation report is that the pace of output growth will slow. but a slowdown in economic growth is not, in itself, sufficient to hit the inflation target. the central issue for monetary policy is whether total - 2nominal demand will slow sufficiently quickly to prevent retail price inflation rising when the favourable effects of a high exchange rate and lower commodity prices wear off. the extent to which domestic demand growth slows down is crucial. at present, we are relying on a sharp deterioration in the trade balance to keep output growth down to levels that do not lead to rising inflationary pressure. but in the longer - run domestic demand growth must fall from its present rate of 3½ - 4

interest rates. the transparency of the new process means that the debate about monetary policy within the mpc is explained clearly to the world at large. hence the reasons why monetary policy is so finely balanced are, i believe, now widely understood. but it is not just the policy debate which is now more transparent. the voting record of each individual member of the mpc is in the public domain. there is a good reason for this. disclosure is an incentive for individuals to cast their vote for the policy most likely to hit the government ’ s inflation target. i have little doubt that the prospect of having to defend one ’ s voting record in public makes individual members of the mpc well aware of their responsibilities. there can be no hiding - 4behind the coat - tails of the chairman, nor disowning a decision subsequently by claiming to have argued against a position adopted by consensus. transparency should improve both the quality of decisions and the accountability of committee members. but there is an additional point which is fundamental to the role of the monetary policy committee. its purpose is to take technical decisions about the level of short - term interest rates. when the issue is one of technical judgment it is better to rely on the collective wisdom of nine people than the views of only one individual. i have noticed that the highest in the land often rely on teams of doctors whereas you and i have only one. of course, it is often tempting to take comfort from the great confidence with which any one doctor proclaims his or her diagnosis. but the evidence suggests that in difficult cases reasonable experts can interpret the evidence in different ways. rather than take comfort from one self - confident view, which i would find difficult to challenge, i would like to know where the balance of professional opinion lies. that is why in the case of essentially technical judgments it is sensible to rely upon collective wisdom, and there are other areas in which we do precisely that. the law lords, for example, reach their decisions by aggregating individual judgments, and the same is true in the united states supreme court. the mpc is based on the same principle. for such a system to work it is crucial that the individual members of the mpc give their best judgment and do not try to reach an artificial consensus. when policy is clearly off - track, as in the spring of last year, it is not difficult to reach unanimous decisions, as the committee did through 1997. but when policy is finely balanced, disagreements about