Following inflation targets

In 1997, the newly-elected Labour government made a surprising move when Gordon Brown handed over day-to-day control of interest rates to the Bank of England (a policy that had initially been proposed by the Liberal Democrats). The Bank is now responsible for setting its base rate of interest so as to keep inflation very close to 2%. Should inflation be more than 1% above or below the target, the governor of the Bank of England is required to write a letter to the Chancellor of the Exchequer explaining the reasons for this and the measures which will be taken to bring inflation back in line with the 2% target.