Perceptions of the reaction function therefore matter a lot and a great deal of effort goes into being transparent about the three inputs: the Committee’s objective; the MPC’s views on the shocks to demand and supply affecting the economy; and our views on how the economy works and how our policy settings affect it.
This conference is focused on one important element of this: the role of financial markets in the setting and transmission of monetary policy. That is covered in the Bank’s publications on how the economy works, including the Committee’s 1999 paper on the Monetary Transmission Mechanism (MTM), and books describing the models used in forecasting.