When I first entered the Bank of England in 1968 there was an aphorism which senior management used quite frequently and approvingly, especially to young academic economists such as myself. This was Governor Cobbold's statement that ‘the Bank is a bank and not a study group’. As I understood the essence of this, it implied that the heart of the Bank then lay in its operational links with financial markets and institutions, and not in its contribution to macroeconomic analysis and policy. In 1968, as I shall describe, this was correct. By 2003 the main function of the Bank had become macroeconomic policy analysis, and decisions on interest-rate changes within the context of an inflation forecast undertaken by trained economists. In a sense the Bank has become an economic ‘study group’ rather than an operational bank, though that assessment needs, and will be given, considerable qualification.

Rather than starting, however, with an assessment of the Bank's recent role changes in the formulation of macro-monetary policy, though such changes have been major, I shall start with a discussion of the Bank's role in the maintenance of financial stability. Here there have been veritable revolutions, and, in my view, we have probably not yet reached a steady state. Then I shall turn to the Bank's (enhanced) role in macro-monetary policy-making. The third main section will cover the Bank's (diminished) role as a market operator in the City; and the final section will review the Bank's (again somewhat diminished) role in external affairs.