It all changed when sterling crashed out of the Exchange Rate Mechanism (ERM) in 1992. A major reason for joining the ERM in the first place was to borrow the German Bundesbank's inflation-fighting credibility. Monetary policy was once again in tatters. What saved the UK was nothing less than a central banking revolution. First came inflation targeting, then the announcement of the Bank of England's (BoE) independence in May 1997. In the decade that followed up to 2007, inflation was both low and stable.
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