ABSTRACT
When the (new) Labour Government was elected in May 1997, one of the first acts of the Chancellor of the Exchequer, Gordon Brown, was to give the Monetary Policy Committee (MPC) of the Bank of England operational autonomy to vary interest rates, but not goal independence (i.e. the right to set its own target). The objective specified for the MPC was to achieve, by varying interest rates, a 2½% rate of inflation in a selected version of the Retail Price Index (RPI), the RPIX. In effect, this version is the RPI excluding the effects of interest-rate changes themselves, an adjustment achieved primarily by removing most of the effects on the RPI of changes in the cost of housing.
