In this new paper, Professor Michael McMahon draws on his research to explore a number of issues surrounding the Bank of England’s recent actions, including:
- What do the Bank of England see that made them increase interest rates?
- Why did the Bank decide to signal the move in advance?
- Financial markets, and particularly the exchange rate, reacted in the “wrong way” to the interest rate increase. Why?
- Should we expect to see further interest rate increases in the coming months?
- The Bank of England has just launched a new version of its quarterly Inflation Report, aimed at a broader audience. Why is the Bank trying to communicate beyond its usual audience of financial journalists and market participants?
This paper is part of an ongoing collaboration between the SMF and the University of Warwick’s Centre for Competitive Advantage in the Global Economy (CAGE). Michael McMahon is Professor of Economics, University of Oxford and Director for Impact at CAGE.