23  All speeches are available online at www.bankofengland.co.uk/speeches  23  Conclusion Before the great wave of globalisation, a series of major institutional reforms increased the transparency and accountability of central banks. The enhanced monetary policy credibility that this brought resulted in a marked drop in inflation and sizable reduction in the sensitivity of inflation to changes in slack. By driving greater competition, increased globalisation has reinforced the effectiveness of these reforms. 57  Monetary policy makers, including the MPC, drew on this credibility during the financial crisis, keeping inflation expectations anchored in the face of deflationary pressures from both home and abroad. Regardless of how external influences on inflation evolve in future, the institutional framework of the Bank of th  England, which is currently celebrating its 20 anniversary of independent monetary policy, leaves the MPC well equipped to deliver price stability. The biggest determinants of the UK’s medium-term prosperity will be the country’s new relationship with the EU and the reforms that it catalyses. Many of the adjustments needed to move to that new equilibrium are real in nature, and are not in the gift of monetary policymakers. But monetary policy can help build the foundations for lasting prosperity by achieving the inflation target in a way that helps smooth real adjustment in the economy and supports jobs in the wake of very large external forces. This is the best contribution the MPC can make to the good of the people of the United Kingdom.
11 Headline CPI inflation averaged 1.9% over this period. 6  All speeches are available online at www.bankofengland.co.uk/speeches  6  Chart 5: Sustained, cumulative relative price shock in goods accommodated through higher services price inflation  Notes: Six-month average of the log-difference between core goods prices (excludes food and energy) and services prices (series indexed; 2005 = 100). The US series uses PCE price indices. Sources: Thomson Reuters Datastream, national sources and Bank calculation. Globalisation has also led to a dramatic increase in the use of imported intermediates in domestic production. The ICT revolution has made a great unbundling of production into global value chains possible, and large wage differentials have made doing so profitable. Intermediate goods trade has represented 80% of the increase in total trade over the past two decades (Chart 6), driving up the value added of imports as a share from 10% of exports in 1990 to around 20% in 2015. 12  12  See Auer, R, Borio, C and Filardo, A (2017), ‘The globalisation of inflation: the growing importance of global value chains’, BIS Working Paper No. 602. 7  All speeches are available online at www.bankofengland.co.uk/speeches  7  Chart 6: The development of global value chains has boosted trade in intermediates  Notes: Imports and GDP are in current US dollars. Sources: Johnson and Noguera (forthcoming), Powell (2016), World Input-Output Database (2016 release) and BIS. This expansion in global value chains has led to greater synchronisation of producer price inflation across countries.