This document series contains open letters between the Governor of the Bank of England and the Chancellor of the Exchequer which are exchanged if inflation moves away from the target by more than 1 percentage point in either direction.
The remit for the Monetary Policy Committee (MPC) requires an exchange of open letters between the Governor of the Bank of England and the Chancellor of the Exchequer if inflation moves away from the target by more than 1 percentage point in either direction. We believe that the open letter system, required in the remits for the MPC since 1997, provides a formal mechanism of transparency and accountability in the event of any appreciable deviations from target.
The remit set in November 2024 requires that the open letter from the Governor should be published alongside the minutes of the following Monetary Policy Committee meeting. The letter should refer as necessary to the Bank’s latest Monetary Policy Report and forecasts. The reason for publishing the letter at that time is to allow the MPC time to form and communicate its strategy towards returning inflation to the target after consideration of the trade-offs, resulting in a more meaningful exchange about the MPC’s strategy. As has been the case since 1997, the Governor is required to send a further letter after 3 months if inflation remains more than 1 percentage point above or below the target.
The Governor’s letter should set out:
- the outlook for inflation and the reasons why inflation has moved away from the target
- the policy action the committee is taking in response
- the horizon over which the committee judges it is appropriate to return inflation to the target
- the trade-off that has been made with regard to inflation and output variability in determining the scale and duration of any expected deviation of inflation from the target
- how this approach meets the government’s monetary policy objectives
