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t is commonly assumed that Gordon Brown introduced inflation targeting to the UK. In 1997, Labour’s first chancellor for 18 years handed operational independence to the Bank of England, setting the newly created monetary policy committee the target of bringing the old RPIX measure of inflation to 2.5 per cent. Several of Brown’s predecessors, however, had also practised inflation targeting, even though it was not described as such when Nigel Lawson in effect brought in such a policy in the 1980s.
The first formal inflation targeting in Britain was introduced by Norman Lamont, after Britain’s ejection from the old European exchange-rate mechanism on “Black Wednesday” in 1992, initially seeking to bring RPIX (the retail prices index excluding mortgage interest payments) to between 1 per cent
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