Bank of England's Spencer Dale: Monetary policymakers should be concerned with the real economy

Speaking to the Asian Business Association and Chinese Business Association of London Chamber of Commerce and Industry, Spencer Dale sets out his views on the objectives of monetary policy. Some choice paragraphs (our emphasis):

The remit given to the Monetary Policy Committee makes clear that our job is to hit the 2% inflation target. But it also acknowledges that inflation will on occasions deviate from its target as a result of shocks and disturbances, and that “...attempts to keep inflation at the inflation target in these circumstances may cause undesirable volatility in output”. Although the language is arcane, the meaning is clear: monetary policy should try to prevent damaging booms and busts in output and employment.
The MPC has objectives for growth as well as for inflation. The current inflation targeting regime provides considerable flexibility for the MPC to support output and employment. And in recent years, the MPC has used that flexibility to the full. Indeed, some have argued excessively so. The MPC has been at the forefront in supporting growth and employment and continues to be so. But that flexibility is constrained by the discipline that monetary policy must be set in a manner consistent with inflation coming back to its target. Without that credibility, monetary policy wouldn’t have the flexibility to support the real economy. And ultimately delivering low and stable inflation is the best contribution monetary policy can make to achieving a robust and sustainable recovery.