BoE's Broadbent: More 'protracted and clearer' decline in inflation needed to confirm downward trend

investmentweek.co.uk:

He said a lot of economic metrics – such as GDP, employment and wages – may not be 'perfectly measured', which is why often the relevant information comes with a delay leading to revisions to several data sets.

Speaking at the London Business School today (18 December), the deputy governor for monetary policy addressed the use of data and estimates by the MPC, but also the problems the committee is facing due to the current «volatility of official estimates» and data.

He said a lot of economic metrics — such as GDP, employment and wages — may not be «perfectly measured», which is often why the relevant information comes with a delay leading to revisions to several data sets.

For instance, Broadbent highlighted how estimated growth during 2020 and 2021 was revised up by almost two percentage points and, as a result, «the economy is now thought to have reached its pre-pandemic size nearly two years earlier than was previously thought».

Bank of England meets expectations as rates held at 5.25%

Sometimes revisions are less important, he noted, but there is «almost invariably» a degree of measurement error in economic series.

He pointed to the recent steep decline in the response rate to the Office for National Statistics, forcing the agency to suspend the publication of its Labour Force Survey, used for employment and unemployment estimates.

Employment rates have started becoming of a greater importance since the Global Financial Crisis. Broadbent highlighted how, pre-crisis, there was a tight correlation between MPC policy decisions and GDP growth, since «an acceleration in demand would lead to lower unemployment».

Yet, since the crisis, the committee has put greater weight on indicators such as wage growth and other