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BOE's Dhingra: Waiting to ease policy 'is not costless'
MORE BOE'S DHINGRA: WAITING TO EASE POLICY 'IS NOT COSTLESS'#bankofengland #ukeconomy #swatidhingra #interestrates #inflation #monetarypolicy
— Mace News (@MaceNewsMacro) February 21, 2024
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At the February meeting of the MPC, I voted to cut Bank Rate by 25bps. In this note, I discuss the reasoning behind my vote to start normalising Bank Rate. I first note that monetary policy needs to be forward-looking because moderation of the policy stance requires time to implement and to feed through to the real economy. I then discuss trends and developments in the economy that suggest the outlook for headline inflation is bumpy but downwards. Consumer price inflation is on a firm downward path, and has been for some time now. Producer price inflation, which tends to lead consumer price inflation, suggests there is more to come, including in non-energy services. I finally argue there are downside risks to living standards from keeping policy tight. Despite an easing in inflation and some real wage recovery, consumption remains below its pre-pandemic level. This is in striking contrast to the Euro area and the United States where consumption bounced back some time ago. The evidence to err on the side of overtightening is not compelling in my view as it often comes with hard landings and scarring of supply capacity that would weigh further on living standards. post: BOE'S DHINGRA: MONETARY POLICY NEEDS TO BE FORWARD-LOOKING BECAUSE MODERATION OF THE POLICY STANCE REQUIRES TIME TO IMPLEMENT AND TO FEED THROUGH TO THE REAL ECONOMY. post: BOE'S DHINGRA: EVIDENCE TO ERR ON THE SIDE OF OVER TIGHTENING IS NOT COMPELLING AS IT OFTEN COMES WITH HARD LANDINGS AND SCARRING OF SUPPLY CAPACITY. post: BOE'S DHINGRA: WE HAVE A LONG WAY TO GO BEFORE COMING TO A FINELY-TUNED ESTIMATE OF THE MEDIUM-TERM RESTING PLACE FOR BANK RATE. post: MORE BOE'S DHINGRA: REMAINING CHALLENGE OF MEETING THE LAST MILE OF INFLATION TARGET MAY REQURE A DIFFERENT STRATEGY THAN IN PREVIOUS ERAS #bankofengland #ukeconomy #swatidhingra #interestrates #inflation #monetarypolicy
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- Posted: Feb 21, 2024 9:37am
- Submitted by:Category: Medium Impact Breaking NewsComments: 0 / Views: 2,618
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