UK Monetary Policy Independence Could Lead to Unstable Interest Rates
The U.K. monetary policy framework aims to maintain stable prices and economic growth by targeting inflation and giving the central bank independence to make decisions. However, there are concerns that the credibility of inflation forecasts may decrease, leading to frequent changes in interest rates. This could potentially harm policy coordination and encourage too much intervention in the economy. Despite these risks, the new rules-based fiscal and monetary policies are expected to help keep the overall economy stable.