The United Kingdom struggled for many years with monetary targets that were repeatedly missed, in a context of undesired exchange rate movements, before embarking on an experiment with exchange rate targeting in October 1990, whose collapse in September 1992 led to the adoption of inflation targets from 1993.
| Years | Targets and attainment | Classification |
| 1974-90 | attempts to manage exchange rate float by both intervention and interest rates, but recurring exchange rate crises; DCE targets agreed with IMF undershot 1976/77 and 1977/78, overshot 1978/79; wide targets primarily for broad money 1976/77 to 1986/7 missed six years out of eleven, and never hit more than two years in a row, erratic convergence; renewed attention to exchange rate towards end of period including unannounced shadowing of DM February 1987-March 1988, then no specific targets until entry to ERM October 1990; monetary policy operating through OMOs, interest rates and fiscal policy, with recurring attempts to reset monetary arrangements; repeated failures to control bank lending partly offset by improved control of government debt sales | loosely structured discretion LSD |
| 1991-92 | in ERM with wide margins from October 1990 to September 1992 | loose exchange rate targeting LERT |
| 1993-96 | wide inflation targets under ‘new framework’ for monetary policy more or less attained | loose inflation targeting LIT |
| 1997-2023 | more formal and structured inflation targeting, with central bank instrument independence; 2013 revised remit for monetary policy committee allows temporary deviations from target to limit instability in output; narrow targets mostly attained; targets overshot 2011 and from late 2021 to 2023, but medium- and long-term inflation expectations remain broadly within range of target; strong fiscal and monetary response to Covid-19; gradual quantitative tightening from 2022; mini-budget plus liability-driven investment (LDI) crisis September 2022, followed by stabilisation and consolidation policies | full inflation targeting FIT |
Selected IMF references: RED 1977 pp20-1, 59-62; RED 1979 pp21-2, 43-5; RED 1982 pp47-53; RED 1986 pp62-4; RED 1988 pp20-1; RED 1991 pp21-4; SBI 1993 pp35-9; SR 1993 pp11-14; SR 1997 pp14-16; SI 1999 ch. I; SR 2013 p14; SR October 2018 p32; SR 2022 pp20, 31-3; SR 2023 pp15-18, 39; SI 2024 pp4; SR 2024 pp16-19.
Additional sources: Houben (2000); Cobham (2002, 2013).
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Monetary Policy Frameworks 