Monetary Policy Committee: Inflation

Lord Peston Excerpts

Wednesday 13th February 2013 Lords Chamber

[Lord Peston]

Dare I say to the Minister that he is mistaken? The word flexibility does not appear anywhere in the Bank of England Act. He is entirely right that the Monetary Policy Committee behaves as if it does have a flexible inflation target—the trouble is that it does not, and therefore it is acting illegally. For a great many years my noble friend Lord Barnett and I have been trying to get the Bank of England Act modified so that what the MPC is doing—which, as the Minister says, is quite right—turns out also to be legal.

[Lord Deighton]

I do not really want to get into a semantic argument about the definition of flexibility, and I do not know whether it appears in the original Act. However, to my simple understanding, the remit and the MPC’s behaviour clearly demonstrate significant flexibility, which is what you would expect in a policy tool to cope with our difficult and challenging economic circumstances.