Here is Chancellor Denis Healey, writing in his memoirs3 about a spat with the Prime Minster of the day:  3  2  Healey, D (1989), The time of my life, Michael Joseph London. BIS Review 11/2004  ‘At this time my own relations with Jim were shaken by an incident just after the Party Conference. On October 6 I had asked him to let me raise interest rates by another 2 per cent to the then unprecedented level of 15 per cent…He refused. I said I wanted to take the matter to Cabinet that morning. ‘All right’ he replied ‘but I will not support you.’ Nevertheless I insisted…’ In the event this did not prove necessary: Callaghan backed down, leading Healey to comment wryly that ‘This was the only time I have ever used the threat of resignation to get my way.’ The new framework has taken the politics out of interest rate decisions without sacrificing democratic accountability or oversimplifying the policy process. It is an elegant institutional solution to the lengthy debate between those who favoured untrammelled discretion and those who advocated rules (such as monetary targets); one, moreover, which manages to respect the constitutional priorities of a parliamentary system. Achievements Performance over the six years since the Bank became independent has been impressive. Against the target of 2.5% for RPIX which ran from 1997 until December 2003, average inflation was 2.4%.
Every month I may have a fairly well developed view not just about this month’s interest rates, but about where interest rates are likely to need to go in the future, to achieve the inflation target. But that view may - indeed should - change in the light of new information, better research, another set of forecasts, perhaps a different view of the risks. In that sense every month is a fresh decision. What doesn’t change is what we are trying to achieve. This clarity about aims is what gives us the flexibility to learn, so important if we are to avoid major error. (ii)  Effective communication  Maintaining this clarity through effective communication is critical. The MPC aims to be as open and straightforward as possible. Sometimes this involves lengthy explanations of rather arcane issues. A recent example is the change in the inflation target. As you probably know, in January the Chancellor replaced the target of 2.5% as measured by the RPIX by a 2% target as measured by the new CPI. We have used speeches, Parliamentary appearances and short articles to set out as clearly as possible the nature of this worthwhile but essentially technical change, in order to underline one simple message: that the change in target in no way weakens the commitment to price stability, and indeed has no material implications for monetary policy.