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Topic: Symmetrical inflation target

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Theory 2 - Theories - Monetary Policy Committee - Monetary Policy - Economics bank - Virtual Bank of Biz/ed A symmetrical target means that if inflation seems to be heading well under target, the MPC can reduce interest rates to encourage growth in demand. Since the adoption of the Consumer Price Index as the official measure of inflation in 2003, the inflation target for the MPC became 2% but is still symmetrical. If inflation misses the target by more than 1% either side, the Governor of the Bank of England (as Chairman of the MPC) is required to write an open letter to the Chancellor. www.bized.ac.uk /virtual/bank/economics/mpol/mpc/theories2.htm

In the News - Individual News Item: 09 May 2003 However, it still differs significantly from the UK inflation target which is what is termed a 'symmetrical target'. Gordon Brown has long been pushing for the ECB to adopt a symmetrical target and this may be a reason that is given for arguing against the UK joining the Euro. This means that the UK aims for an inflation rate of 1% either side of the target of 2.5% whereas the ECB is aiming to keep inflation below 2%. www.bized.ac.uk /dataserv/chron/news/1881.htm

Bank of EnglandMonetary PolicyMonetary Policy Committee (MPC)Framework The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement. Inflation below the target of 2% is judged to be just as bad as inflation above the target. The inflation target of 2% is expressed in terms of an annual rate of inflation based on the Consumer Prices Index (CPI). www.bankofengland.co.uk /monetarypolicy/framework.htm

Sveriges Riksbank/Riksbanken - Bergström: High unemployment not due to monetary policy One of the points of having a clear, symmetrical inflation target is that we are assessed according to how well we meet our target – if we were to deliberately keep below the target we would undermine confidence in the Riksbank. Of course, it is always possible to find periods where inflation has deviated from target according to one measure or another. ”The relationship between inflation and employment in the short term is not as simple as it sometimes appears. www.riksbank.com /templates/Page.aspx?id=14780

Tenders Direct: News Item Our symmetrical inflation target requires the monetary authorities to be forward looking and proactive as we have seen Dr Greenspan be over many years. Our symmetrical inflation target means that the Bank has to take deflation as seriously as inflation. With difficult long term decisions that in my view the country must stick with - Bank independence, a symmetrical inflation target, long term fiscal rules, attention to long term investment and also the obligations of the New Deal - our watchword is stability yesterday, today and tomorrow. www.tendersdirect.co.uk /news/PPF/ID/17361/Shownews.asp

BBC NEWS VOTE2001 Q&A: Britain and the ECB He claims that other European finance ministers increasingly back his case for a symmetrical inflation target. Firstly, he sets the target inflation rate for the Bank of England- currently 2.5% (compared to 2% in the eurozone, which is set by the ECB itself). That means that in recent months the Bank of England has been cutting interest rates as inflation is well below target, thus helping the UK economy. news.bbc.co.uk /vote2001/low/english/newsid_1350000/1350962.stm

BBC News BUSINESS Rethinking inflation A symmetrical inflation target that forces the central bank to intervene if inflation is too low as well as if it is too high. Ian Harwood says the flexibility in the Bank of England's inflation target, which is symmetrical with a lower as well as an upper limit, means a degree of anti-deflation can be built into policy. His book, "The Death of Inflation," four years ago, forecast the state of the world economy as we see it now, and argued that the time had come, even then, to rethink the most basic assumptions about economic life. news.bbc.co.uk /1/low/business/1271446.stm

Guardian ECB should seek symmetry While Threadneedle Street has a symmetrical target - too low inflation is to be avoided just as much as too high inflation - the ECB has inflation ceiling of 2%. If the ECB adopted the Bank of England's symmetrical inflation target, it would remove one of the Treasury's worries about joining the euro. But even with inflation overall above the ceiling, high inflation in economies like Ireland means that other countries like Germany have to live with low inflation, to the point where some analysts worry that falling prices may be a bigger threat than price rises. www.guardian.co.uk /print/0,3858,4686857-110369,00.html

ECB The MPC has a symmetrical inflation target – that is not the case with the ECB. This target contrasts with the UK approach, where the Bank of England aims to keep RPIX inflation within 1% either side of 2.5%. The ECB will not publish inflation forecasts and minutes of meetings will remain a secret. dspace.dial.pipex.com /town/parade/rcb48/ecb.htm

[A-List] UK economic success story Brown's symmetrical inflation target = meant the Bank was obliged to cut rates, further boosting domestic = demand. Stipulation By the time Labour came to office, the Conservatives had already = realised that using intermediate targets - the public sector borrowing = requirement, the money supply or the exchange rate - as a proxy for = inflation were a poor substitute for targeting inflation itself. Apart = from "de-politicising" interest rates, Brown's key reform was to insist = that the MPC treat an undershoot of his 2.5% target as seriously as an = overshoot. lists.econ.utah.edu /pipermail/a-list/2002-May/019169.html

United Kingdom -- 2002 Article IV Consultation, Concluding Statement of the IMF Mission The independence of the Bank of England in pursuing its symmetrical inflation target has allowed it to respond appropriately to cyclical fluctuations, including the recent slowdown in external demand. The stability of inflation expectations around the inflation target in the five years since the creation of the Monetary Policy Committee (MPC) attests to the credibility of the framework and the MPC's actions within it. The discussion of the staff report for the Article IV consultation with the United Kingdom is expected to be held by the Executive Board of the IMF by end-February 2003. www.imf.org /external/np/ms/2002/120902a.htm

Fear of Ôdoing a Japan' freezes interest rates - [Sunday Herald] Here in the UK, the Bank of England has a symmetrical target for inflation. If anything, our inflationary pressures are on the upside and the MPC's decision, to leave rates on hold yet again, suggests aÊmajorityÊofÊitsÊmembersÊare concerned that reducing rates now would risk stoking inflation and overshooting the top end of their target. WhenÊtheÊFed'sÊopenÊmarket committee decided, last Tuesday, to leave US interest rates at 1.25%, it also reiterated that warning, judging that, Òthe probability of an unwelcome substantial fall in inflation, while minor, exceeds that of a pickup in inflation from its already low levelÓ. www.sundayherald.com /33697

Symmetrical inflation target - Encyclopedia.WorldSearch A symmetrical inflation target is a requirement on a central bank to pay just as much attention to a situation where inflation is too low as when inflation is too high. That is not the case for The European Central Bank however, which has a non-symmetrical inflation target, meaning it only needs to take action when inflation is too high. The Bank of England for instance has a symmetrical inflation target. encyclopedia.worldsearch.com /symmetrical_inflation_target.htm

Tutor2u - arguments against the UK joining the euro By contrast, the Bank of England's success in keeping inflation within target and at the same time cutting interest rates aggressively to avoid recession in 1999 may have undermined the case for early entry into the Euro Zone for the UK. It may prove to be a recipe for economic stagnation and high unemployment if the ECB pursues a deflationary monetary policy for Europe to keep inflation within the 2% limit. If interest rates, exchange rates and fiscal transfers cannot be called on to deal with economic shocks such as a burst of imported inflation, then wages and prices will have to do the job. www.tutor2u.net /economics/content/topics/europe/euro_against.htm

Asia Times: US Fed: Outlook ''symmetrical'' - or cross-eyed? Target inflation in your policy-making; that's your job. That there is no inflation to speak of in the US economy was confirmed once again on Wednesday when the Labor Department said that the consumer price index rose 0.2 percent last month for a four-month low, after rising 0.4 percent in September. After a lengthy policy-making session the Federal Open Market Committee also said its near-term outlook now was ''symmetrical'' - which for some reason or other means that it is more inclined to leave rates alone in coming weeks than to change them. www.atimes.com /editor/AK20Ba01.html

David Smith's EconomicsUK.com: Moving the inflation goalposts The intention was not only to keep the Bank on its toes, and prevent inflation drifting too far away from target, it was also to underline that the approach to policy was strictly symmetrical. The difference in inflation shown by the two measures, in fact, is at a near-record level, hardly the best time to make the change. HICP inflation could be very low, requiring the Bank to cut interest rates, even when house prices were rising at, say, 20% or 30%. www.economicsuk.com /blog/000026.html

Guardian Unlimited Politics Special Reports Full text: Gordon Brown's CBI speech First, the importance not just of setting clear and precise objectives and rules of procedure but also a symmetrical inflation target that, with the bank seeking 2.5 per cent inflation, is pro growth as well as pro stability. It was from these mistakes that in 1997 we learned: immediately after we came to power we raised interest rates and then even as inflation expectations started to fall the newly independent Bank of England raised interest rates again so that we could ensure a long period of low inflation and sustained growth. And again in 2003 the Bank of England, determined to keep inflation low and stable in a strengthening economy, have raised interest rates to ensure that Britain continues to enjoy stable growth. politics.guardian.co.uk /economics/story/0,11268,1087887,00.html

Jubilee Research: Situation precarious, but it's not financial Dunkirk There, monetary easing should be accompanied by the announcement of a British-style symmetrical inflation target to raise prices. Nationalisation of the banking system and a moratorium on interest payments should be considered as a way of anchoring asset prices. Japan is a more intractable problem because deflation is now well entrenched, and the fall in the Nikkei index to below 10,000 means that large chunks of the banking system could go under. www.jubilee2000uk.org /analysis/articles/Situation_precarious_no_dunkirk.htm

Department of Molecular & Integrative Physiology Recent Publications Unimodal DSC neurons may be those whose unimodal input fully reduces target uncertainty and therefore have no need for input of another modality. It is also shown that cationic or anionic selectivity could be obtained by symmetrical placement of the functional groups. In this study, 12 rats were exposed to 3 volumes of lung inflation (inflated: approximately tidal volume; half-deflated: half-tidal volume; deflated: lung volume at functional residual capacity), 6 rats at 8.6-MPa in situ peak rarefactional pressure (MI of 3.1) and 6 rats at 16-MPa in situ peak rarefactional pressure (MI of 5.8). www.library.uiuc.edu /bix/SOLSPUBS/mip.htm

Press release - The Chancellor’s five-point plan for Britain - Deloitte & Touche LLP We are expecting UK interest rates to be reduced all the way down to 3% by the end of this year, from the current 3.75%, as the weakness of the pound fails to offset sluggish domestic activity and inflation drops back to well below the target level. And a new symmetrical fiscal rule is envisaged to tighten or loosen policy in response to economic conditions. The Treasury’s assessment of the five economic tests to determine whether the UK should adopt the euro has had an unexpected and remarkable benefit – five ideas for reform to improve the efficiency of the UK economy. www.deloitte.com /dtt/press_release/0,2309,sid=2834&cid=19788,00.html   (680 words)

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