Mark Carney Thinks This Is the Inflation Rate You Should Watch

At the Bank of England, there’s inflation, and then there’s inflation.

Rate setters presented a curious picture on Thursday. On the one hand, officials cut their inflation forecast, and suggested they may need a bit more time to get the rate back up to the 2 percent target. That would suggest the economy needs a bit more help, but weirdly, they didn’t discuss adding stimulus and focused all of their discussion on whether rates should rise.

For Governor Mark Carney, core inflation tells you what you need to know, and he said in a Bloomberg Television interview that it’s something he’s watching.

“My personal view is it is important that we look at it. Particularly because of this imported disinflation, it shows up through core inflation.”

The key is for the Bank of England to avoid getting behind the curve because one-off factors that are keeping a lid on price pressures can drop out pretty quickly.

“What we want to avoid is to have cost pressures build up too much domestically to the extent that once these foreign factors ultimately pass through the economy, we’re overshooting that inflation target because of domestic strength.”

Bloomberg

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.