monetary policy formulation process as  In addition, we also intend to establish  well. Accordingly, we will reduce the  two other important consultative  number of Monetary Policy Committee  committees in relation to financial  (MPC) meetings to 8 meetings per year  system stability and private sector views  from the current level of 12 meetings per  on Central Bank policies and regulations. year. Consequently, around 5-6 weeks  We are of the view that the inputs of  will be devoted for analysing the latest  such committees would also be helpful  developments in the economy and  in devising appropriate monetary policy  developing model-based  decisions. macroeconomic forecasts, thereby facilitating the provision of in-depth and more forward looking insights to the monetary policy formulation process. We will continue to monitor developments in the monetary sector closely and adopt timely and effective monetary policy measures, supported  The above improvements envisaged in  by other macroprudential measures in  the monetary policy decision making  order to ensure stable monetary  process are expected to be  conditions and price stability, thus  implemented before the end of 2017.  facilitating envisaged economic growth. This will entail revising the Monetary Law Act to accommodate some of the new changes to be introduced in this process in the medium-term.
The real need is to convey our reaction function, which publishing a path for Bank Rate would not obviously accomplish. We need to communicate how we are likely to react to the different types of shock that can drive the economy away from its steady state path. A complete specification is not feasible. We do not have a 100% correct model of the economy. And policy cannot sensibly be described by a simple mechanical rule but, rather, is determined by the judgment of policy makers, with the composition of the one person/one vote committee evolving over time. But at any particular time, some possible shocks – and so sources of risk to the inflation outlook – seem more important than others. As the Governor has announced, 29 the MPC is therefore planning to do more to explain our collective assessment of risks. 27  Before I was a member of the MPC, I was on the secretariat, so I have attended nearly every MPC meeting since 1997. 28  See response to question 285 in oral evidence to the House of Commons Treasury Select Committee inquiry on “the Monetary Policy Committee of the Bank of England: Ten years On”, April 2007. 29  King, M. A. 2007, “The MPC ten years on”, lecture to the Society of Business Economists, May. BIS Review 66/2007  7  Communications about the transmission mechanism, and the place of money within it Grasping our reaction function requires an understanding of how we think the economy works.