(2) what assessment his Department has made of the effects of recent trends in the rate of inflation on the British economy.
The Monetary Policy Committee (MPC) of the Bank of England has operational responsibility for the conduct of monetary policy. Under the Chancellor’s remit for the MPC, the operational target for monetary policy is an underlying inflation rate (measured by the 12-month increase in the CPI) of 2 per cent. The remit was last confirmed on 21 March 2007.
The Treasury’s latest assessment of the economy was published in Budget 2007 (HC 342). Since then, Consumer Price Inflation turned out at 3.1 per cent. in March, This prompted an open letter from the Governor of the Bank of England and a reply from the Chancellor which further discussed recent developments and prospects for inflation.
For its part, the Government will continue to be vigilant and disciplined in the fight against inflation. To that end, the Chancellor announced to Parliament on 1 March 2007 overall headline settlements for public sector workforces covered by Pay Review Bodies are to be less than the 2 per cent. inflation target in 2007-08.