The Governor of the Bank of England has formally written to the Chancellor of the Exchequer, explaining why Consumer Prices Index (CPI) inflation has moved more than one percentage point away from the government's 2% target. This exchange of letters, a statutory requirement under the Bank of England Act 1998, occurs whenever inflation falls below 1% or rises above 3%.
The letters, exchanged in April 2026, provide a crucial insight into the Bank's assessment of current economic conditions and its strategy for monetary policy. While the specific details of the letters' content have not been fully disclosed, they are expected to outline the factors contributing to the inflation deviation, along with the Bank's forecast for inflation and the measures being taken to return it to the 2% target over the medium term.
This formal communication underscores the accountability framework for the Bank of England's Monetary Policy Committee (MPC) in achieving its primary objective of price stability. The transparency of this process is intended to reassure the public and financial markets that the Bank is actively managing inflationary pressures and is committed to its mandate.
The context for this exchange is the broader economic environment, which has seen various pressures impacting consumer prices. These pressures can stem from global supply chain disruptions, energy price fluctuations, or domestic demand dynamics. The Bank's analysis in these letters will invariably delve into these contributing factors, offering a comprehensive overview of the economic landscape influencing inflation.
For UK households and businesses, understanding the reasons behind inflation deviations is critical. High inflation erodes purchasing power and can make financial planning more challenging. The Bank's explanation provides context for the economic decisions being made and offers an outlook on future price stability.