Consumer Price Index (United Kingdom)
An explicit inflation target was first set in October 1992 by Chancellor of the Exchequer Norman Lamont, following the UK's departure from the Exchange Rate Mechanism.
Initially, the target was based on the RPIX, which is the RPI calculated excluding mortgage interest payments.
On election day in May 1997, the new Labour government handed control over interest rates to the politically independent Bank of England Monetary Policy Committee.
This committee is given the responsibility of adjusting interest rates in order to meet an inflation target set by the Chancellor.
[4] The CPI calculates the average price increase as a percentage for a basket of 700 different goods and services.
John Redwood, the Conservative MP, has said that CPI targeting meant that interest rates were set lower at a time of rising (RPI) inflation.
[9] Nevertheless, following the UK general election of May 2010 the incoming Conservative Chancellor George Osborne announced that CPI was to be more widely adopted, including for setting benefits and pensions.
inflation hit 24% in 1975 and in 1976 the Sterling crisis occurred, followed by the Winter of Discontent [ 2 ]
