From the Guardian business homepage just now:
Common sense or the textbook?
Which way will he jump?
There is only one right option. Odds on he chooses the wrong one....
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I don’t get it. He has an inflation target (which is actually a core inflation target). If he is nowhere near reaching it why would he increase interest rates? Tory strategists will (or should) be hoping that he doesn’t. They have deprived themselves of the fiscal tools that could be used to offset an ill-judged rate rise.
By their own choice they are Carney’s hostages. As is all of Britain. Oh dear.
I imagine their logic tells them that wage rises fuel more rises and once raised they don’t go the other way. It could however be a very bad move for the economy. My guess is he will wait
I’m not sure its textbook MMT theory but my feeling is that interest rates should be about 2-3% with inflation at also the same level for a healthy economy.
So interest rates do need to increase – very slowly!
At the same time to avoid another crash we need to reflate the economy by running higher budget deficits. Another second best option would be to also push the pound lower to stimulate exports and discourage imports. MMTers won’t like this but it’s better than letting the economy crash.
Whatever, the right option would have to include a measure of fiscal stimulus. The chances of that happening this side of another major crash are just about zero.
Instinct matters
Typical narrow thinking; most ordinary peoples pay is still way behind inflation since 2008.
One of the biggest Cons has been “we have inflation under control”.
Where are these pay rises happening-to about 10% of the population ?-household debt is still rising (http://www.thisismoney.co.uk/money/cardsloans/article-3007368/Household-debt-hits-record-high-9-000-says-PwC.html) so ‘disposable’ sure means in only one direction?
I fear very much that a large proportion of the population have now been brainwashed into believing it is correct and proper to suffer pay which trails inflation, but it’s ok because you can borrow for what ever you need. The media is crammed with buy now pay later offers and now even worse than that the instant credit adds which suggest that it is ok to be “completely spent out” for if a domestic or motoring emergency arises instant funds are available. All this instability at a time of less security zero hours contracts partime working and the like.
How long can this continue?