Central Banking and Political Economy : The Example of the United Kingdom's Monetary Policy Committee

In this speech, Paul Tucker, Executive Director for Markets and Monetary Policy Committee member, explores the political economy context in which modern-day central banks work. He reviews how in the United Kingdom political economy considerations have shaped key features of today's monetary policy framework from the operational independence, rather than goal independence, of the Bank of England to the design of the institutional structures within which the MPC operates and is held accountable, including, in particular, policy-rate decisions being taken on the basis of one member-one vote. Against that backdrop, he addresses some topical issues in monetary policy strategy and communication: whether to publish individually attributed paragraphs in the MPC minutes or a planned path for the Bank's policy rate. Finally, he considers the context behind the different approaches among central banks, and individual policymakers, to the role of money. And he explains his own view that while it is useful to recover the concept of shifts in the supply of broad money, careful attention to the underlying drivers of any such shifts is essential; and that any role of money over and above that of credit and asset prices needs to be disentangled