The Bank of England acquired interest rate setting powers in 1998. In May 1997, the then newly appointed Chancellor of the Exchequer, Gordon Brown, announced that the labor government was giving the Bank of England operational responsibility for setting interest rates. The Bank of England Act of 1998 was implemented on June 1st, 1998. Control of monetary policy now resides with the Bank of England in its Monetary Policy Committee (MPC).

Inflation has been over the Bank of England's 2.5 percent target for 11 months. The Bank uses the retail price index less mortgage interest payments as its main inflation measure. It is interesting to note that unlike other countries, the Bank does not use a core inflation rate that excludes food and energy. Rather, it omits mortgage interest payments, which are affected by monetary policy decisions.

Inflation has been over the Bank of England's target of 2.5 percent for six months. The Bank uses the retail price index less mortgage interest payments as its main inflation measure. It is interesting to note that unlike other countries, the Bank does not use a core inflation rate that excludes food and energy. Rather, it omits mortgage interest payments, which are affected by monetary policy decisions.

Interest rate decisions are announced immediately after their meetings. The meeting's minutes, including a record of any vote, are normally published two weeks following the meeting. The Bank is not entirely free from the Exchequer, but is assigned an inflation target in the Chancellor of the Exchequer's budget message.

The Bank's monetary policy objective is to deliver price stability (as defined by the Government's inflation target) and, without prejudice to that objective, to support the Government's economic policy, including its objectives for growth and employment. The Government's inflation target is confirmed in each Budget statement. The Bank publishes a quarterly Inflation Report, which spells out the Bank's forecasts and the thinking of committee members. Needless to say, market participants closely scrutinize the report.