The purpose of this article is to describe ONS’s responsibilities in relation to the inflation target. The article is divided into two main sections: the institutional arrangements, and inflation measurement in the UK.
The processes for monetary policy in the UK might be depicted as a tripartite relationship between HM Treasury, the Bank of England, and ONS: HM Treasury sets the target, the Bank of England is responsible for meeting it, and it uses statistics, predominantly from ONS, to inform the policy decision. The first section of this paper describes these relationships in more detail, identifying the many agreements - ten in total - that jointly determine these relationships. This is probably the first time that an overview of all these agreements has been brought together in one place with references.
The second section of the paper provides a brief overview of how ONS measures inflation. It starts with a short description of the price statistics produced by ONS, and goes on to consider in more detail the functions and characteristics of the Retail Price Index (RPI) on which the inflation target is based. It concludes with a summary of the main elements of the programme to develop the RPI methodology.
Download
