Monetary Policy, Demand and Inflation

10 Pages Posted: 21 Mar 2006

See all articles by Stephen Nickell

Stephen Nickell

University of Oxford - Nuffield Department of Medicine; Bank of England - Monetary Policy Committee


In this speech, Stephen Nickell, member of the Bank's Monetary Policy Committee, explains the factors underlying his decision to vote for a rate cut in December and January. After 18 months of below-trend growth, there is now a modest degree of spare capacity in the UK economy. Looking forward, growth will probably approach trend levels in the near future. However, it is less probable that growth will move far enough above trend to eliminate the spare capacity in the medium term. As a consequence, there is unlikely to be any serious inflationary pressure generated by excess demand in the economy. So long as energy prices stabilise and there are no surprise second-round effects, CPI inflation will probably undershoot the target further out if rates are left on hold.

Suggested Citation

Nickell, Stephen, Monetary Policy, Demand and Inflation. Quarterly Bulletin, Spring 2006, Available at SSRN:

Stephen Nickell (Contact Author)

University of Oxford - Nuffield Department of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

Bank of England - Monetary Policy Committee ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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