With the elimination of impromptu, spontaneous interactions over coffee, in elevators, and unplanned encounters, organizations need to understand the impact on communication, collaboration, innovation, and comradery. Will networks and relationships depreciate? Is there a heightened risk of silos? Are there missed opportunities for creativity in problem solving? Are there insights and knowledge being overlooked? And how do all these influence dialogue, debate and ultimately outcomes in the organization? Uncertainty. The third dynamic is uncertainty. As many industries and organizations face unprecedented businesses challenges, we know that employees are also facing unique personal challenges related to their health, well-being and job security, both for themselves and their families. While we understand that this level of uncertainty can be paralyzing for individuals,10 we should also be asking how this level of persistent and profound uncertainty may impact a firm’s culture. One potential risk is the potential for “action bias.” When feeling out of control due to the uncertainty of the environment, people are more likely to act quickly. They do this to feel as though they “did something about” an issue when in fact, more thought and analysis would result in a better business outcome.11 Even for organizations that are not as directly impacted by the pandemic, thought should be given to how uncertainty about personal and professional circumstances impacts decision making, relationships, and behaviors in the workplace. Decreased monitoring/oversight. The final dynamic is monitoring and oversight.
Now the point of all that was not just to help me decide how I should vote in the MPC next month! It was to distinguish two distinct issues relating to monetary policy that I want to discuss over the next few minutes. The first is the objective of monetary policy - what it is that we, in the MPC should actually be trying to do. And that objective couldn’t be clearer. It is to achieve - on average and over time - a target rate of retail price inflation, of 2½% on the RPIX measure (i.e. excluding MIPS), as set by the Chancellor of the Exchequer. 1  BIS Review 18/2000  I suppose it might just be coincidence, but since we adopted inflation targetting as the objective of monetary policy, towards the end of 1992, our economy has performed remarkably well. In fact over the past 7 years we have enjoyed the longest period of sustained low inflation we’ve known for a generation. Retail price inflation - on the Government’s target measure - has averaged 2.7% over that time. That’s just about 2% on the European standardised HICP measure of inflation and on that measure our inflation rate is currently the lowest in Europe at 0.8%. Alongside low inflation we’ve also had the lowest nominal interest rates that most of us can remember. Short-term rates have averaged some 6¼%, (fluctuating between 5 and 7½% over the period) compared with some 11¼%, (fluctuating between 7 and 15%) over the previous decade.