Inflation, expectations and monetary policy

Abstract

In this speech, Professor David Blanchflower, member of the Monetary Policy Committee (MPC), talks about the importance of inflation expectations for monetary policy making. He discusses what has happened to inflation and inflation expectations in recent months, and what actions should be taken in this area in the context of the current conjuncture. He then identifies four distinct phases of the downturn in the United States, and notes a number of similarities with the United Kingdom, suggesting that in the United Kingdom we may see a substantial decline in growth, a pickup in unemployment, and declining consumption growth driven by significant declines in house prices. He emphasises the importance of getting ahead of the curve in order to head off these downside risks.