While central banks may legitimately advise on the technical implementation of such intervention, and be the agency through which it is carried out, it is far better all round in my view that responsibility for the choices implicit in such policies remains clearly with the Government. Secondly, for a long time after the war in the UK - until well into the 1970’s, majority opinion did not identify a specific role for monetary policy within overall economic policy; nor was there any very clear understanding of the central bank’s role in maintaining systemic financial stability. Economic policy was widely seen as requiring the use of all available policy instruments - monetary policy, overall fiscal policy, direct controls, as I say, even prices and incomes policies - in concert to BIS Review 66/2000  2  achieve an appropriate balance at any particular time between what were seen as the conflicting objectives of growth and employment, on the one hand, and controlling inflation and maintaining reasonable balance of payments equilibrium, on the other. Economic policy overall was in fact directed at managing what was seen as the trade-off between these social objectives. And this again involved intrinsically political rather than technical judgements, though in this context, too, there clearly was a role for the central bank in proffering detached technical and analytical advice.
10  BIS central bankers’ speeches  Chart 6 Global imports of goods and services (% of GDP) Import share of GDP  Per cent  35 30 25 20 15 10 5  1980 1984 1988 1992 1996 2000 2004 2008 2012  0  Note: Value of total imports of goods and services divided by world nominal GDP. Source: IMF World Economic Outlook database and Bank calculations. Chart 7 Persistent divergence in the price of (core) goods and services  Note: Six-month average of the log-difference of core (excluding food and energy) goods and services price indices (2005=100). The US series uses PCE price indices and begins in 1999 due to data limitations. Sources: DataStream, national sources and Bank calculations. BIS central bankers’ speeches  11  Chart 8 Average world output gap and core inflation (weighted by UK-import shares) 4  Per cent of world GDP  Percentage change on a year earlier  2.5  3  2.3  2  2.1  1  1.9  0  1.7  -1  1.5  -2  1.3  -3  1.1  -4 2001 2003 2005 2007 2009 2011 2013 2015 Global core CPI inflation (RHS) UK-wtd world output gap (LHS)  0.9  Notes: Average world output gap and core inflation (weighted by UK-import shares). Source: IMF, ONS, DataStream, and Bank calculations. 12  BIS central bankers’ speeches