BOE's Carney: MPC Tradeoff on Inflation, Output

The transcript discusses the Monetary Policy Committee's (MPC) approach to balancing inflation and output stabilization. It highlights the challenges posed by sterling's depreciation and the need for a longer horizon to return inflation to target. The MPC implements a comprehensive package of measures to stimulate the economy, considering the low interest rate environment and ensuring the stimulus is effective. The focus is on timely and coherent actions to support growth while managing inflation expectations.

What is the main tradeoff the MPC is facing?

• Increasing domestic costs and reducing output

• Returning inflation to target and stabilizing output

• Managing sterling's appreciation and inflation

• Balancing inflation and unemployment

Why does the MPC plan to return inflation to target over a longer period?

• To disregard the effects of sterling's depreciation

• To avoid undesirable outcomes like lost output and unemployment

• To increase domestic costs significantly

• To immediately stabilize the economy

What is the purpose of the MPC's comprehensive package of measures?

• To increase interest rates

• To ensure inflation settles at the target over a longer period

• To stabilize the currency exchange rate

• To reduce the Bank rate permanently

How does cutting the Bank rate help the economy?

• It increases the value of sterling

• It immediately eases financing conditions for households and firms

• It reduces the need for foreign investments

• It raises interest rates on loans

What challenge does the MPC face when interest rates are very low?

• Inflation targets are easily met

• The financial system becomes more stable

• The Bank rate cuts are fully passed on

• Interest rates on loans might increase