1. Exquisite Tweets from @DuncanWeldon

    PreoccupationsCollected by Preoccupations

    1. Bank of England looks set to hike next week.
    And yes, inflation is high but growth is weak & real incomes are being squeezed.

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    DuncanWeldon

    Duncan Weldon

    2. Message from the Bank since August has been clear: we expect weak growth, squeezed incomes and, oh, if we are right - we’ll have to hike.

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    DuncanWeldon

    Duncan Weldon

    3. Why the shift from the Bank? Possibly worries about “financial stability” (polite way of saying “bubbles”) but more likely...

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    DuncanWeldon

    Duncan Weldon

    4. They’ve become pessimistic on the supplyside of the UK economy. They think the 10yr weakness of productivity growth isn’t temporary -

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    DuncanWeldon

    Duncan Weldon

    5. It’s here to stay (in their view). Growth since 2010 has relied on using up spare capacity but with unemployment ultra-low -

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    DuncanWeldon

    Duncan Weldon

    6. That spare capacity has been eroded. Without productivity growth, then we will soon (again in the view of the MPC as I see it) face -

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    DuncanWeldon

    Duncan Weldon

    7. Rising price pressures. This is grim. It’s the equivalent of saying today’s weak growth is “as good as it gets”.

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    DuncanWeldon

    Duncan Weldon

    8. I don’t understand what made the Bank swerve to this view. But it’s where they think we are - and it’s a defendable position.

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    DuncanWeldon

    Duncan Weldon

    9. Macro policy is usually about trade offs. And the terms of those trade offs in the U.K. look grim. (Ends).

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    DuncanWeldon

    Duncan Weldon

    10. When I said the thread was done, that was fake news.
    There’s a huge outstanding question.

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    DuncanWeldon

    Duncan Weldon

    11. Is next week’s hike “one and done”? I.e. is it just reversing last August’s cut or the start of a (v gradual) hiking cycle?

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    DuncanWeldon

    Duncan Weldon

    12. (And actually *ends*) - if it’s driven by supplyside pessimism then it’s the start of a cycle not a one-off.

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    DuncanWeldon

    Duncan Weldon