Inflation And The Monetary Policy Committee

In a paper written for the European Policy Forum in July, Giles Keating uses the lessons from the last two decades of policy making in formulating a radical new proposal for UK policy post EMU entry. He suggests that today's independent Monetary Policy Committee should be succeeded by an independent Fiscal Commission, with powers for limited variation of tax rates to counter asymmetric impulses to UK inflation, up or down, after EMU entry.

Citing episodic monetary policy mistakes and fiscal policy errors which led to bouts of inflation from the late seventies to the last general election allied to the existing UK institutional structure, he believes that although erstwhile politically sensitive decisions are now the domain of an independent monetary policy committee "The shift to (Bank of England) independence has removed this effect but has not removed the risk of technical errors which figure in at least two of these inflation episodes (...) and the risk now is that a very