- BoE's MPC menber Cunliffe: Forecasts show domestic inflation picking up
Market news
27 February 2020
BoE's MPC menber Cunliffe: Forecasts show domestic inflation picking up
- We can see inflation pressures coming from UK labour market
- The question is how much of weak UK domestic inflation is cyclical versus structural
- Expects domestic cost pressures to feed through into inflation
- That should push inflation slightly above target
- We may be seeing trend decline in British firms' margins and profitability
- Trend real interest rate for UK is between zero and 100 bps
- We cannot explain very low interest rates purely through trend rate
- There is an entrenched pessimism in real interest rate curve
- There is long-term pessimism about productivity in advanced economies
- BoE should not rush into radical conclusions about changing framework for its monetary policy
- We should use policy space rapidly to avoid a liquidity trap in case of shock
- There is space for a conventional fiscal policy without helicopter money
- We need to revisit fiscal sustainability benchmarks in light of low-interest rate environment
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