Contents

Summary

• The existing monetary framework of the Bank of England fails to manage supply-side shocks and financial crises effectively, which leads to economic volatility and potential policy errors.


• Targeting the growth path of nominal GDP would provide a more stable and predictable macroeconomic environment by focusing on total nominal spending rather than a rigid inflation target.


• Nominal GDP targeting reduces policy uncertainty by minimising discretionary decision-making, improving transparency, and better anchoring expectations for businesses and financial markets.


• Establishing a nominal GDP futures market could provide real-time guidance for policymakers, while enhanced data collection and market communication would facilitate a smooth transition.


• By stabilising total nominal spending, nominal GDP targeting supports long-term economic stability, reducing volatility in output and employment while ensuring a more growth-friendly policy framework.


• The Bank of England’s failure to anticipate inflationary trends has undermined trust in its decision-making. A transparent and predictable nominal GDP-based framework would rebuild confidence in monetary policy.

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