Sarah Breeden: Monetary policy as engineering?

Speech by Ms Sarah Breeden, Deputy Governor for Financial Stability of the Bank of England, at the Institute of International Finance's Talking Policy Series, 19 December 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Accompanying annex of the speech 

This is my first speech as a Deputy Governor and member of the Monetary Policy Committee (MPC) at the Bank of England. I am going to use the speech to describe my approach to monetary policy and how I am applying it to the situation the MPC currently finds itself in. I can think of few better places to do so than a 'Talking Policy' seminar, and I am very grateful to have been invited along to speak to you all today.

I will focus on a few important questions. Where is the economy now? How did we get here? What could happen next? What does that mean for my approach to monetary policymaking? And finally, why is that approach the right thing for the economy?

Where is the economy now?

Monetary policymakers like to talk about uncertainty. But it is fair to say that working out what the state of the UK economy is and where it's heading is especially uncertain at the moment. There are measurement issues, volatility in the data and exceptionally large data revisions. The bottom line is that it is more difficult to extract a clear signal from the noise.4 That said, I will start by briefly painting a picture of what I think is happening in the economy in general terms