Outlook: Why Bank can feel quietly satisfied

WHEN Tim Holt, director of the Office for National Statistics, apologised yesterday for the fiasco his organisation had made of calculating and revising official figures for average earnings, he would have added an extra, silent message of contrition to the Bank of England. All users expect official statistics to be accurate and reliable, but it is crucial for the Bank's judgement about interest rates.

The reason is that official figures are the only defence against anecdotal evidence, the heavy artillery used by business lobby groups and industry in their attack on the MPC's decisions. Any industrialist or manufacturing union can reel off job losses here and low pay settlements there. The Bank can only set what it thinks will be the right rate for the whole economy by having the full picture, and the only way to get the full picture is to look at comprehensive, national data based on a wide sample, properly weighted and adjusted for seasonal fluctuations.

When the MPC raised interest rates to their peak of 7.5 per cent in June, the official average earnings figures were the last piece of a jigsaw portraying a generally tight labour market. Although not decisive in themselves, they helped tip the balance of argument in the monetary meeting. But the move was so unpopular with the business lobby that there was general rejoicing - and later fury in Threadneedle Street - when the ONS revised the figures to show average earnings growth slowing rather than accelerating in the spring.

The Bank can now feel quietly satisfied that what looks to have been a very thorough review of the average earnings figures has resulted in a series that looks much more like the original picture before the ONS started fiddling with it.

The context is now wholly different, however. Growth has slowed to near standstill, the international backdrop is as depressed as ever, and inflation remains near its target. So although pay is rising at an underlying rate of 4.5 per cent, the Bank's tolerance limit, it does not have the automatic implication that interest rates won't fall again.

In fact, the downward trend in earnings, albeit from a higher than expected peak, encouraged the financial markets to be a bit more hopeful yesterday about the possibility of a rate cut. News about economic activity since last month's MPC meeting has been more upbeat. On the other hand, there remains no sign of inflationary pressure.

The complicating factor this month is next week's Budget. The MPC will already know its broad outline so that it can base its judgement on whatever fiscal stance the Chancellor has decided to adopt. The committee might calculate that if it does cut rates, this will be read as a vote of no- confidence in growth prospects. And if it doesn't cut rates, this might be taken as a sign of a loosening of fiscal policy to come. In these circumstances, the only proper course for the MPC is to ignore how its actions might be interpreted, and simply weigh up all the hard facts - with a bit more confidence in their accuracy after yesterday's review.

Teeth should be brushed twice a day to prevent tooth decay
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
Those who were encouraged to walk in a happy manner remembered less negative words
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
Renee Zellweger as Bridget Jones
ebooksAn unforgettable anthology of contemporary reportage
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London