Rachel Lomax: Current monetary policy issues Speech by Ms Rachel Lomax, Deputy Governor of the Bank of England, to the Hull & Humber Chamber of Commerce, Hull, 22 November 2007. I am very grateful to Gareth Ramsay for his help in preparing this speech, and to several other colleagues at the Bank of England for useful comments. *  *  *  Tonight I want to talk about the current issues confronting the Monetary Policy Committee. It’s hard to tell the story of an economy as open as the UK without starting with global developments. That’s not a point I need to labour here in Hull, the Gateway to Europe, and home to a brand new World Trade centre. And it’s never been more true than today. The past 4 years have seen the fastest growth in the world economy since the early 1970s 1 . But even more striking than its pace has been the change in the balance of global growth, with emerging economies contributing nearly three quarters of the increase in world output 2 . This has become even more pronounced over the past year, as Chinese growth has picked up even as the US economy has slowed. The world’s economic see-saw has tilted. That’s the new reality behind two dramas that have held the world’s attention since last August: the turmoil in financial markets; and the renewed surge in energy prices. Both these developments are highly unusual and very recent. No-one knows how they will play out.
On his initiative, on December 19, 1991, the Government adopted a Decision which obligated the National Bank to start printing value coupons. This Decision, adopted in greatest secrecy, was a legal basis for all operational actions that allowed the new currency, the Denar, to be presented to the public on April 26, the following year, 1992. On this day, also on the initiative of the academician Kljusev the systemic laws were adopted, as well as the document on the Anti-inflationary program, which, unfortunately, did not survive the fall of his Expert Government. On this day, besides recollecting the past, we are called to look towards the future. Here we look at the importance of low inflationary expectations for the efficiency of the economy and the role of the National Bank in maintaining these expectations. In fact, academician Kljusev had devoted his entire scientific work to the issue of efficiency of economic policies. For the central bank, as well as for the commercial banks that the central bank closely cooperates with, basically there is only one true treasure on which the effectiveness of its policies is based and that is the confidence of the public. It is impossible to imagine a stable bank without having to imagine the confidence of citizens who are its customers. Also, it is impossible to imagine confidence in a central bank without simultaneously having confidence in its objectives.