But theory combined with measurement is at least a crude guide. And as we observe disinflation across a number of advanced countries, the message from theory is that monetary policy should work to counter “bad” disinflation stemming from weak demand, but look through “good” disinflation from increased competition and improved productivity.
Conclusion Let me wrap up with the Bank’s outlook and a few concluding remarks. As we noted in the Monetary Policy Report that the Bank issued two weeks ago, inflation has moved further below the 2 per cent target in recent months.