That regional network has grown out of the Bank’s branches that were established in 1826 to deal with problems caused by the failure of local banknote-issuing banks. (The nearest branch to North Wales would have been in Liverpool, and like several of the sixteen branches which the Bank opened at that time it was located on land previously occupied by licensed premises - the old Queen’s Arms in Castle Street. Indeed the guiding principle seems to have been “If it works as a pub it will work as a bank”. The Licensed Victuallers Association has taken its revenge in recent decades, as old banks have been turned into pubs). Within the branches, the Bank appointed an Agent to liaise with local industry and commerce, and since 1930 they have been sending regular reports on their economies to Threadneedle Street. During the 1980s and 1990s, most of the branches were closed as different schemes for guaranteeing the supply of bank notes were established. But the Agents remained, and the network was extended to its current line-up of twelve - including a new Welsh Agency located in Cardiff, now run by Adrian Piper. Between them, the Agents are in regular contact with some 8000 firms. This provides the basis for the Agents’ monthly reports and presentations to the MPC; the Committee also commissions special surveys and asks for Agents’ help in understanding puzzles in the data. This information is currently published in summary form each quarter, alongside the Inflation Report.
The origins of the present approach go back to 1992, when the Conservative government adopted an inflation target as the centrepiece of a package of reforms designed to rebuild credibility with financial markets in the wake of sterling’s abrupt departure from the ERM. This approach - which came to include the popular “Ken and Eddie show” - proved successful in establishing a track record of low and stable inflation. In 1997, the incoming Labour Government “entrenched” this success by handing the operation of monetary policy over to the Bank of England and setting out a detailed institutional and legal framework for the conduct of monetary policy. The result was to depoliticise interest rate decisions, within a framework of accountability that left the Government clearly in charge of setting objectives for inflation. Taking operational monetary policy decisions out of the hands of politicians was a decisive step. The touchstone of a successful monetary policy framework is its credibility. If people believe policy makers will always act to keep inflation low, this expectation will itself put a brake on inflationary wage and price increases. Economists long argued that it was difficult for politicians to make a fully credible commitment to low inflation. And perceptions are what matter: even if a government has no intention of manipulating  BIS Review 71/2004  1  monetary policy for political ends, as long as firms, workers and financial markets entertain that as a possibility, the job of keeping inflation low will be that much harder.