- MPC debate is about speed at which inflation will come back to target
- Expects to write letters about excess inflation throughout 2011
- Fiscal consolidation over 5 years will dampen growth in demand
- Discussed case for and against fiscal consolidation with Chancellor
- MPC will not try to cut bank rate below 0.5% under any circumstances
- Doesn’t share view BOE should have remit more like Fed
- UK does not have continuously declining fx rate but single big past move
- Awful lot will hinge on how far rise in oil prices persists
- Inflation expectations and wages crucial to medium-term inflation outlook
- Have not yet seen much evidence of pick up in medium-term inflation expectations, money wages
- If we have above target inflation for long enough, risk to inflation expectations
- All of us on MPC pay great attention to wage negotiations
- To raise interest rates to make a gesture is self defeating
- MPC’s disagreement driven by view of wage deals in 1-2 years
- MPC will have great difficult if further increases in energy and commodity prices
Bean:
- Expects growth to resume in Q1 2011
- Underlying growth in Q4 2010, Q1 2011 “looks weak”
- Unclear if economy is in temporary soft patch or more durable slowdown
- Inflation to remain well above target. probably 4-5% range for much of this year
- Expects inflation to drop back early 2012 though may remain a little over target
- Has become more concerned elevated inflation may last longer than he first thought
- Balance of risks to inflation has been shifting upwards in recent months
- Rise in commodity prices driven by emerging market demand, unusual weather
- Pass through from sterling weakness somewhat larger than I expected
