The Bank of England interest rates and the UK economy

The Bank of England raised its interest rates for the first time in over 10 years on Thursday 2 November. This decision was unsurprising given that the Bank had signaled its likely intentions well in advance. And yet it doesn’t feel like there is a huge amount of strong momentum in the economy that we might typically associate with a rising interest rates. This month the Bank of England launched a new broader-interest version of its quarterly Inflation Report aimed at speaking to a less-specialist audience. In fact, the bullet points of the key messages from November IR discussed above actually come from this new summary. There are a few different reasons to try to broaden the audience from the key messages in the Inflation Report. Here I suggest four: 1. Household actions matter and they also need to form sensible expectations 2. The clearer messaging may help the media and financial market participants to also understand the message. 3. It may help build the publics’ confidence in the institution. 4. It may open a dialogue that can facilitate the flow of information from the general public to the central bank. Now whether these new approaches give rise to significant gains along any of these dimensions remains to be seen. But while many central banks engage in a variety of ways with the public, the Bank of England has taken these first steps to target communication at the general public.

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