the future. just as the monetary policy committee meets monthly to decide on interest rates, so david hume and adam smith met regularly in the poker club to debate the policy issues of the day. hume was an officer of the club with the unusual title of the assassin ’ s assessor, “ without whose assent nothing could be done ”, and whose role was to ensure that in meetings “ there was likely to be no bloodshed ”. so i take it that hume at least would have been content with last week ’ s decision to leave interest rates unchanged. there is no assassin ’ s assessor on the monetary policy committee, nor – you will be relieved to hear – any bloodshed. but, month by month, we shall be debating the prospects for the economy in order to decide in which direction, if any, interest rates need to move.

reading between the lines − speech by sarah breeden given at university of edinburgh business school published on 09 january 2025 in this speech sarah breeden sets out her views on the outlook for the uk economy and for monetary policy. she discusses the challenges around identifying the nature of shocks hitting the economy and how different shocks have different implications for medium - term inflation. speech it has been a little over a year since i joined the monetary policy committee ( mpc ). lots has happened over that period. i ’ m going to use this speech to review what we have learned and where that leaves my view of the outlook for the economy and for monetary policy. in doing that, i will aim to explain how important it is for us to keep asking ourselves which shocks could be hitting the economy and what implications those different shocks would have for medium - term inflation. we are always reading between the lines. before i get into the meat of the speech, i wanted to thank you for inviting me to come to speak to you today. i can think of few better places to come to talk about the economy than one of the homes of adam smith, the father of the discipline – i just can ’ t promise to be as insightful and groundbreaking as he was in his day! why do shocks matter? inflation has fallen materially over the past year. that is welcome news, especially given the painful high inflation period we found ourselves in during the prior couple of years. but as monetary policymakers we must stay focused on where the economy might be heading, not where it has been. that means taking a view on which shocks are hitting the economy and how they might play out over time. this is easier said than done. it is notoriously hard to know which shocks are hitting the economy in real time. reasonable people could take different views on the shocks that explain the same set of data. for example, is a reduction in economic activity a sign of lower domestic demand, lower demand from abroad or a reduction in the supply capacity of the economy? is a fall in import price inflation a sign of past shocks easing off or a new shock hitting? does it reflect a weaker global economy or more productive global suppliers? this isn ’ t just an intellectual exercise. attributing data news to the'wrong'shocks can have material implications for our understanding of the evolution of the economy in the future, and therefore what we should do with monetary policy. as policymakers we are constantly discussing and revising our views