Written question asked by Lord Barnett (Labour), in the House of Lords. It was answered by Lord Sassoon (Conservative) on Wednesday, 28 July 2010.

Monetary Policy Committee

Question: To ask Her Majesty’s Government what guidance they have given to the Monetary Policy Committee on inflation.

Answer: The independent Monetary Policy Committee (MPC) of the Bank of England has operational responsibility for monetary policy, including use of the Asset Purchase Facility (APF) and continues to target 2 per cent inflation, as measured by the 12-month change in the Consumer Prices Index (CPI). Under the APF framework, the Treasury provides an indemnity to the Bank of England for any loss incurred through operation of the facility. The framework also requires the Chancellor to authorise the overall limit on asset purchases. Open letters exchanged between the Chancellor and the Governor agreeing the limit for APF purchases can be found on the Bank of England website. The Bank of England Act 1998 sets out the statutory framework for the Bank of England, including the role and composition of the Monetary Policy Committee (MPC), and provides that ““A representative of the Treasury may attend, and speak, at any meeting of the Committee””. The non-voting Treasury representative ensures that the MPC is aware of relevant Treasury policy matters. For example, the Treasury representative will brief the MPC on major events such as the Budget and the Pre-Budget Report.

Secondary information