Chancellor John Healey re-confirmed the Bank of England’s 2% inflation target on Wednesday, with CPI at 3.1% in August, 1.1 percentage points above it.
The target stays at 2%, measured by the 12-month rise in the Consumer Prices Index (CPI). The Monetary Policy Committee (MPC) must treat it as symmetric and applying at all times.
Healey, Chancellor of the Exchequer, set out the remit in a letter to the Governor, Andrew Bailey.
“I hereby re-confirm the inflation target as 2 per cent as measured by the 12-month increase in the Consumer Prices Index (CPI),” Healey said.
He said higher energy prices from the conflict in the Middle East are putting upward pressure on inflation, and that monetary policy remains vital in returning it to target sustainably in the medium term.
The remit keeps the open-letter rule. If inflation moves more than 1 percentage point from the target in either direction, Healey expects the Governor to write to him alongside the minutes of the next MPC meeting.
Where the Office for National Statistics releases the data after a meeting has begun and before its minutes are published, the letter is due within seven days. A further letter follows if inflation is still more than 1 percentage point out after three months.
The rule has already been used this year. CPI inflation of 3.1% in August prompted an open letter from the Governor to the Chancellor on 17 September, and Healey replied the same day.
The remit also keeps the flexibility built into the framework. It says inflation will on occasion depart from target because of shocks, and that the MPC may therefore allow a temporary deviation rather than risk undesirable volatility in output.
The target is also forward-looking, Healey said, “to ensure inflation expectations are firmly anchored in the medium term”.
On balance sheet policy, the Asset Purchase Facility will remain in place for the financial year 2027-28 and for as long as is needed. Healey said that is consistent with the multiyear strategy the MPC set out on 17 September 2026.
The remit adds that if the main policy rate approaches its effective lower bound, the Committee may judge it necessary to use unconventional instruments. It may also unwind them, consistent with the remit.
On independence, Healey said “the government respects and fully supports the operational independence of the MPC”.
The Committee has nine members: the Governor, three Deputy Governors, the Chief Economist and four external members appointed directly by the Chancellor.
A representative of HM Treasury sits with the MPC at its meetings but cannot vote.
The Bank of England Act 1998 requires the Treasury to specify, at least once in every 12-month period beginning on 1 June, how price stability is defined and what the government’s economic policy consists of.
The remit says any changes to it will ordinarily be set out in future fiscal events.
The MPC is accountable to the government for the remit, and reports to the public through its minutes and the Monetary Policy Report. Healey is copying the remit to the chairs of the Treasury Committee and the Economic Affairs Committee.
