Inflation Dynamics: Observations & Implications
The Monetary Policy Committee's insights on inflation highlight the interplay of external and domestic factors, contrasting outcomes with expectations. Imbalances in demand and supply contribute to shifts in global and domestic prices, with implications for the economy.
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Presentation Transcript
Monetary Policy Committee Observations on Inflation: External vs Domestic Dynamics Outcomes vs. Expectations All slides from: https://www.bankofengland.co.uk/monetary- policy-report/2022/february-2022
Demand and Supply Imbalances Implications for Global Goods Prices and Domestic Prices Contributions to change in G7 goods consumption since 2019 Q4 Indicators of supply constraints Section 2, Box B, Chart A and B in the Monetary Policy Report, February
Macro Outcome and Projection CPI inflation was 5.4% in December and is expected ~~ 7 % in April Contributions to CPI inflation(a) Chart 2.19 in the Monetary Policy Report, February
Micro Underpinnings and Expectations Firms and Workers both expect prices and wages ~~ 5% in 2022 Pay settlements: reported and expected: Agents Survey Firm-level price growth, realised and expected: DMP Survey Chart 2.23 and Chart 3.9 in the Monetary Policy Report, February
Policy Strategy and Expectations Market participants expect policy rates to increase International forward interest rates Financial market measures of inflation compensation Chart 2.25 and 2.26 in the Monetary Policy Report, February
