“ ( a ) to maintain price stability and ( b ) subject to that to support the economic policy of her majesty ’ s government, including its objectives for growth and employment ”. but what matters most is the intellectual framework underlying the behaviour of the central bank. the federal reserve ’ s remit does not make clear if the fomc is supposed to try to exploit some long - term trade - off between employment and inflation. but the practice is clear. under alan greenspan ’ s leadership, the fomc has firmly rejected the notion that by accepting a somewhat higher rate of inflation it is possible to achieve a permanently higher level of employment. it is conventional to express the implications of a vertical long - term phillips curve in terms of the statement that unemployment can be held below the natural rate only by accepting accelerating inflation – or, to be more precise, an inflation rate higher than anticipated by wage bargainers. equally, however, the statement can be turned the other way round. if the central bank is successful in pursuing, over a number of years, a constant rate of inflation, then unemployment – 9 – cannot remain above the natural rate indefinitely. not only can central banks not bring unemployment down below the natural rate for long, neither can they be accused of keeping unemployment persistently above the natural rate. monetary policy cannot influence levels of employment in the long run. there should be no surprise about this. a central bank can use its chosen instrument – interest rates – to hit a nominal target – such as an inflation target, or a target for the exchange rate or even the growth of nominal gdp – but it cannot use a nominal instrument to target some desired level of a real variable, such as the growth rate of output or the level of unemployment. none of the above means that monetary policy has no impact on unemployment. to the contrary, monetary policy does affect the movements of employment and unemployment over the business cycle. and the remit of the mpc makes clear how we should take this consideration into account – as i explained a year ago in a lecture at the lse. by aiming consistently and symmetrically to hit the inflation target, the mpc should ensure that inflation is, on average over a number of years, close to the target of 22 %. shocks of various kinds will mean that inflation will often deviate from the target and the mpc is required to take action to bring inflation back to the target. but it will do so gradually, if to do otherwise would have damaging

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