The Governor of the Bank of England, Andrew Bailey, has sent a letter to the Chancellor of the Exchequer, Jeremy Hunt, outlining the reasons behind the Consumer Price Index (CPI) inflation rate deviating by more than one percentage point from the government's 2% target. This formal exchange, dated April 2026, is a mandatory requirement under the operational framework that grants the Bank of England independence in setting monetary policy, while holding it accountable for achieving the inflation target.
The letters, a long-standing feature of the UK's monetary policy framework, are triggered whenever the annual CPI inflation rate falls below 1% or rises above 3%. While the specific inflation figure for April 2026 has not been publicly detailed in conjunction with these letters, the exchange confirms that the deviation was significant enough to necessitate this explanation. The Governor's letter typically details the factors contributing to the inflation miss, the Bank's current assessment of the economic outlook, and the monetary policy actions being taken or considered to bring inflation back to target.
In response, the Chancellor's letter acknowledges the Governor's explanation and reaffirms the government's commitment to the 2% inflation target. This formal dialogue underscores the transparency and accountability built into the UK's economic governance, providing a public record of the central bank's analysis and its strategy for price stability. The content of these letters often provides valuable insights into the Bank's thinking on prevailing economic conditions and future policy direction.
For UK households and businesses, understanding the reasons behind inflation movements is crucial. Persistent deviations from the target can impact purchasing power, savings, and investment decisions. The Bank's explanation sheds light on whether the current inflationary environment is viewed as temporary or more enduring, and how this influences the outlook for interest rates and broader economic stability.
The Bank of England's Monetary Policy Committee (MPC) is tasked with maintaining price stability as its primary objective, which is defined by the 2% CPI inflation target. The regular exchange of letters between the Governor and the Chancellor serves as a vital mechanism for ensuring that the public and Parliament are kept informed about the Bank's performance and its ongoing efforts to achieve this mandate.
Source: Bank of England