michael saunders

Interesting column from ex-Bank of England MPC member @msaundersecon in @theipaper today: Rishi Sunak says he has met his pledge to halve inflation – but he had almost nothing to do with it inews.co.uk/inews-lifestyl…

"If, as a nation, we believe that getting inflation below 5% is a triumph and represents mission accomplished, then we are living in a fool’s paradise. If households and businesses believe that inflation of 4 to 5% is the norm, then inflation expectations will adapt accordingly."

How to improve the fiscal rules? Michael Saunders explains how reforms to the UK's fiscal framework would help put the public finances on a more sustainable path and provide a better platform for a much-needed strategy to improve the economy's supply-side: bit.ly/45TdDG

….and easing is some way off – probably later than the European Central Bank and the Fed – unless clear signs emerge that the economy is set to weaken severely.

Unless the economy weakens enough to cause unemployment to rise markedly, pay growth probably will stay well above a target-consistent pace (around 3% y/y) next year, keeping inflation above the 2% target. The MPC remains likely to lift rates further…

Will second round effects persist ? The direct and indirect effects on UK inflation from last year's surge in energy prices are starting to fade. However, second-round effects from higher energy prices have broadened, with strong private-sector pay growth and rising inflation…

See below for my latest piece: Greedflation - myth and reality

We suspect that monetary policy cycles in the next 10-20 years also may be relatively large compared to the modest cycles that were the norm for the last 30 years.

…and tighten only gradually in early 2022; and the boost to inflation expectations from the energy price surge.

See below for my latest piece, on the U.K. monetary policy outlook…

Monetary policy cycles in the next 10-20 years may be large compared to the norm for the last 30 years due to a more volatile inflation climate and the likelihood policy will be shaped by risk management considerations stemming from low neutral rates: bit.ly/3N8Nhdv

…and some institutional changes to ensure supply-side reforms are based on expert advice and among the govt’s priorities.

…More public investment, greater focus on STEM in education, cheaper childcare to lift participation, reform planning to raise labour mobility, closer trade links with EU…

See below for my latest piece, “A Plan for Growth” - measures to improve the UK supply side…