Six Months on the MPC: A Reflection on Monetary Policy

In this speech, Marian Bell, of the Monetary Policy Committee discusses three current issues in the context of the role and limitations of monetary policy: house prices, discretion and deflation. She suggests that areas such as house prices are not suited to monetary policy control and argues that the degree of discretion offered by the letter-writing process is limited. Deflation, on the other hand, is an area where monetary policy can have an influence. As deflation is a monetary phenomenon, the monetary policy authorities' job is to prevent a pernicious deflation occurring. She notes that with the exception of Japan, broad money growth in the major economies is strong and the risk of deflation is not high currently, but if it should threaten, it is something that policy-makers would respond to.