Letter to the Governor on the new Monetary Policy Framework
Bank of England
THE NEW MONETARY POLICY FRAMEWORK
"Improving the institutional arrangements for economic policy will be accorded a high priority by the Government in order to deliver long term economic stability and rising prosperity. Our Manifesto commitment is to "ensure that decision-making on monetary policy is more effective, open, accountable and free from short-term political manipulation". The reforms I lay out below will put the arrangements for monetary policy-making on a sound and stable footing for the long term.
2. Within its overall responsibility for economic policy, including stability, growth and employment, and for setting the inflation target, the Government intends to give the Bank of England operational responsibility for setting interest rates. The Government plans to provide in the Queen's Speech for legislation to amend the Bank of England Act 1946. The Bank will of course remain in public ownership. The legislation will set up the new monetary policy framework, and provide for greater accountability. It is my intention to ensure the passage of this legislation as soon as possible.
3. This letter sets out how the new arrangements for monetary policy-making will work and how I propose that we manage matters during the transition.
06 May 1997
Statement by the Chancellor on the central economic objectives of the new government