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Published online by Cambridge University Press: 17 February 2022
One of the interesting canards, perhaps as a result of the inflationary episodes of the 1970s and 1980s, was that price stability rapidly developed into a sufficient statistic to judge whether a macroeconomic equilibrium had been achieved. In both the public arena and the policy sphere, the continuing attainment of low and stable rates of inflation seemed to suggest that monetary policy had not only functioned well but perhaps had discovered the key ‘to end boom and bust’. Indeed, the then chancellor, Gordon Brown, summed up the view well, which was very much the overall consensus at the time, in a speech to the British Chamber of Commerce in 2000:
it was to avoid the historic British problem – the violence of the repeated boom and bust cycles of the past – that we established the new monetary framework based on consistent rules – the symmetrical inflation target; settled well-understood procedures – bank independence; and openness and transparency. And side by side with it and as important, a new fiscal discipline with, again, clear and consistent rules – the golden rule for public spending; well understood procedures – our fiscal responsibility legislation; and a new openness and transparency.
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