[Re: Economic data picks up but the Bank must clarify its position on inflation, yesterday]
The author is right that the Bank of England has lost credibility. But it was not so long ago that the Bank adhered to targets regardless of circumstance. When recession struck in the 1980s and 1990s, it took all necessary measures to lower inflation. Tough decisions led to a period described by Sir Mervyn King as the Great Stability, during which the Bank put prices on a stable path. It is regrettable that the Bank has effectively subordinated its price stability remit by signalling that inflation up to 2.5 per cent will be tolerated.
[Re: Technology has the power to transform – but it won’t render jobs obsolete, Tuesday]
The author is wrong to liken the economic effects of the combustion engine to recent advances in information technology. The former led to enormous productive improvements. Exponential increases in computing power, however, have not had such a direct effect, occurring at the same time as relatively stagnant productivity trends. Economists have called this the “productivity paradox,” a phenomenon familiar to those of us who feel we spend more time dealing with computer errors than actually working.
BEST OF TWITTER
So the UK no longer has a 2 per cent inflation target; it now has a below 7 per cent unemployment target.
Oh dear. The Bank seems to have made a deliberate policy decision to return to boom-and-bust.
Glad the Monetary Policy Committee made clear that rate rises in current circumstances would be madness.
A key component of growth is confidence. Mark Carney has made the right decision on interest rates.