The Bank’s main influence over inflation comes through its scope to influence the economy’s output gap and the degree of non-tradable inflation (which accounts for around half of the regimen that makes up the consumers price index). Monetary policy can also at times have a significant effect on inflation through its influence on the exchange rate and tradables prices.
There are major structural forces acting to reduce inflation that domestic monetary policy cannot influence. These forces, arising typically from trends in globalisation, information technology and demography, have exerted substantial downward pressure on global inflation in recent years.