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Monetary Policy - Monetary Policy CommitteeFurther workIn this section we look at a few other areas of economic theory that you may want to consider when looking at the control of inflation using monetary policy. The MPC view of the role of money - monetarists traditionally regard inflation as 'always and everywhere a monetary phenomenon'. How does this square with the MPC using interest rates as the key method of controlling inflation? What is their view of the role of money? The behaviour of long-term interest rates - changes in the official rate of interest set by the MPC will always move short-term interest rates in the same direction. However, the movement of long-term interest rates is far less certain. Long-term interest rates are influenced by a variety of other factors and so could go either way when short-term rates are changed. |
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