The Bank of England targets an annual inflation rate of 2% for the United Kingdom.
The target is set by the UK government and is measured using the Consumer Prices Index, or CPI. The Bank’s Monetary Policy Committee uses interest rates and other monetary-policy tools to try to keep inflation near that level.
The target is symmetric: inflation above 2% is considered as undesirable as inflation below 2%. If inflation moves more than one percentage point away from the target, the Bank’s governor must write an open letter to the chancellor explaining the deviation and the planned response.
The target is not a promise that prices will rise by exactly 2% every year. Energy costs, food prices, exchange rates and other temporary shocks can move inflation away from it. The Bank is judged over time, rather than on every monthly reading.