On Inflation Targeting in the United Kingdom

This paper discusses some of the operational issues relevant to inflation‐targeting in the United Kingdom, in particular: whether inflation targeting is ‘new’; whether it is potentially destabilising; and whether it requires too much knowledge on the part of the authorities. It goes on to discuss the role of inflation forecasts in general, and inflation probability distributions in particular, in the context of inflation‐targeting in the UK. It also discusses the role of transparency in such a regime, and provides some evidence on its effect.