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Reaction Roundup #3

Adam Posen thinks the unemployment rate was the right focus, but that the MPC have sent the wrong signal by refusing to QEase further, with inflation on target.

Charles Goodhart explains the market reaction for the LSE blog, but I am not sure his description of market movements tells the right story; equity and Sterling reaction at 11am was consistent (equities fell, Sterling rose), and indicated the announcement was more hawkish than markets expected.  Goodhart’s closing paragraph is good.

The M&G Bond Vigilantes say the Bank’s announcement lacked clarity.  I can imagine the furrowed brows at the Bank “what couldn’t be clearer, we’re targeting inflation, unemployment and financial stability.  Don’t you get it?”

Steve Williamson picks up on a quote from a Guardian article which claimed that:

Carney said the unemployment target could be abandoned should the bank’s internal analysis show GDP growth was the cause of a rise in prices of more than 2.5% in two years’ time.

This is simply mis- or over-interpretation by Guardian.  Carney never said anything about GDP growth “being the cause of” inflation two years out.  A correct phrasing would be to complete the sentence “…should the bank’s internal forecast predict inflation of more than 2.5% in 18-24 months time”.

Joseph Cotterill at FT Alphaville has a good discussion on the MPC minutes and forward guidance.

Larry Elliott only just manages to avoid writing “expectations-augmented Phillips curve” in a blog post for the Guardian on inflation, unemployment, Osborne and UK macro policy.

Categories: Monetary Policy
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