Bank of England Urges Caution in UK Economy Optimism

Don’t believe the hype, is this week’s message from the Bank of England. As economic commentators line up to argue that the UK’s economy is roaring, pumped as it is with central bank amphetamines, the top brass in Threadneedle Street claim they are being a little excitable.

Analysts are getting agitated about the prospect of rampant inflation because of the pressure on firms to increase output or push up prices. But the message from Ben Broadbent is calm down dear. He is the first of the monetary policy committee members out of the blocks this week in the race to convince central bank doubters.

He says put to one side the GDP figures and focus on unemployment. It may be a lagging indicator, but it tells you more about the pressure on supply from higher demand and, therefore, more about the pressure on prices. Other measures of supply have become unreliable.

“Changes in unemployment are now a more reliable measure of what’s happening to the degree of slack in the economy than economic growth alone,” Broadbent argues. GDP can grow and there still be slack, goes the argument.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza