The end of days for inflation targeting

UK inflation is high and rising. Unemployment is high and rising. That isn't supposed to happen, is it?

According to the Output Gapologists Playbook, that definitely isn’t meant to happen. Regrettably, this unacceptable stagflation cocktail is also accompanied by a budget deficit that is one of the highest in the OECD. Last week, I argued that the Bank of England’s inflation targeting framework was failing the UK economy. This week, an alternative policy framework is explored. Since the Bank of England Act in 1998, the MPC has operated an inflation target with formidable success, at least until recently. I think they have been lucky. It seems likely that the inflation moderation has been m...