] in many cases, this involves redefining or re - expressing the underlying problem in terms of more controllable ( or at least measurable ) outcomes or objectives. and, in association with this process or redefinition, responsibility for addressing the problem is often transferred from the political domain – where the complex interdependencies can lead to a ‘ log jam ’ in decision making owing to the impossibility of reconciling various competing interests – to supposedly dispassionate and independent experts or technocrats. the parallels with efforts to achieve price stability are obvious. as former vice - chairman of the federal reserve board alan blinder once famously remarked, the economically meaningful definition of price stability is an environment where the economic decisions of firms and households are neither delayed nor distorted by the incidence of and / or concerns about inflation. [ 9 ] judging whether this has been achieved is inevitably somewhat subjective. and, given the multitude of behaviours, shocks and policies that influence price developments in the shorter term, one can easily see how the achievement of price stability in a truly complex economic environment has the character of a ‘ wicked problem ’. over recent decades, the policy design response to meet the challenges created by such complexity has been to ‘ tame ’ that wicked problem. price stability is operationalised as an inflation target – an objectively achievable rate of inflation in a particular price index. through the institutional mechanism of independent central banks and mpcs, technocrats are charged with solving the ‘ puzzle ’ of achieving the inflation target through employing the potentially powerful, but specific, tool of monetary policy. in the uk at least, such ‘ taming ’ of the challenges we face in achieving price stability has yielded a quarter of a century of improved macroeconomic performance, with inflation much lower and more stable on average than in the decades prior to the introduction of inflation targeting. there is much to admire in that. moreover, the unacceptably high inflation we now face as a result of geo - political developments and their impact on commodity prices should not detract from what has been achieved over the entire span of the inflation targeting era. indeed, the anchor provided by the inflation target for both the formulation and communication of monetary policy is all the more valuable when price stability is being challenged by adverse external shocks. but we also need to be wary that ‘ taming ’ of the problem does not lead us astray. in particular, we need to recognise that solving the inflation

inflation is a ‘ wicked problem ’ − speech by huw pill introductory remarks given at the warwick think tank, warwick university published on 16 february 2023 speech good evening everyone. it is a great pleasure to be here at the warwick think tank today. thanks to the organisers for the invitation to participate. i am sure that you have many questions about the outlook for the uk economy. we all do. i am looking forward to discussing those in a moment. but before we turn to that discussion, i thought i would kick - off with a few remarks about the framework within which monetary policy works. the first thing to say is that the objective of monetary policy in the uk is very clear. the bank of england ’ s monetary policy committee ( mpc ) has the objective of price stability. through achieving price stability, monetary policy creates an environment in which firms and households can make the longer - term plans and investment decisions that generate the innovation, dynamism and productivity that ultimately drive growth and prosperity. price stability has been operationalised in the form of an inflation target of 2 % for the consumer price index ( cpi ). this target holds at all times. the mpc therefore needs to achieve this target on a sustainable basis : it is not a target for one moment or horizon, but must be achieved on an ongoing basis over the medium term. while we have seen some easing in the past couple of months as the impact of past energy price rises starts to recede, uk cpi inflation is still in double digits. that is unacceptably high. in line with its mandate, the mpc has taken action to bring inflation back to the 2 % target on a sustainable basis. over the past 18 months since i joined the mpc : we have raised bank rate by almost 400 basis points ; we have halted asset purchases and started to run down the portfolio of assets held as a result of quantitative easing ( qe ) ; and we have changed the character of our communication about the economic outlook and its implications for policy. taken all together, this represents a significant tightening of the monetary policy stance, commensurate to the significant challenges to price stability we have been and are facing. these challenges come from recent rises in european wholesale energy prices ; from disruptions to global supply chains ; from the strength of corporate pricing power ; and from tightness in the uk labour market. all of these challenges continue to threaten or linger. the mpc has done a lot to address these challenges.