My BBC interview on inflation

I'll be on the BBC News channel at about 6.40pm today talking about the newly released UK inflation figures.

Inflation has risen to 3.5% in January, driven by VAT, oil prices and lower retail discounting. It's interesting to see some analysts comment that the VAT rise has not been fully passed on, and yet consumer prices show a less-than usual level of discounting in the January sales. I am not sure how these two are meant to be disaggregated (or if they even can be).

Overall, higher inflation is a good thing for the economy and will help us to get out of recession faster. While it will have a short-term impact on savers, if it helps to work out some of the inflexibilities in the economy, they will benefit in the long term along with borrowers and wage-earners.

What is interesting is the Bank of England's pause to the QE programme - I suspect the inflation rise is the main reason for this (after all their job is to target inflation at 2%). I hope they will signal a willingness to restart QE when inflation falls in the spring.


Min said…
Leigh, I am recording all of the upcoming BBC America news shows in hopes of seeing you. :)

About quantitative easing: From what I hear, it hasn't worked too well in Japan and the U. S. How is it working in the U. K.?
Leigh Caldwell said…
Well please do let me know if I made it to America! Not sure if they cover the UK inflation figures there, but maybe for British viewers visiting the US.

QE: it's hard to be sure how well it's working, because (as with the stimulus bill or any other intervention) we can't see the counterfactual. But my feeling is that it is helping, and is probably stopping bank lending from falling too precipitously.

Any increase in the money supply right now is likely to simply counter part of the fall in money velocity. I'm sure the authorities are keeping a very close eye on this in order to withdraw it if they see a risk of inflation starting to rise again.
Min said…
Thanks, Leigh. :)

Unfortunately, I didn't see you on the BBC America news programs. :( Maybe next time. :)

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