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Why the Bank of England Should Target Growth

Targeting price stability alone may have worked when inflation was a more reliable proxy of the business cycle. Now that it isn’t, Britain's central bank – and perhaps others – should consider a change in mandate to target growth as well.

OXFORD – The Bank of England raised interest rates to 0.75% this month, in the belief that inflation will exceed its mandated 2% target in about two years. But raising interest rates tends to dampen economic activity, and growth is hardly rampaging in the United Kingdom. Should the BoE consider a change to its mandate to include economic growth?