Outlook: Why Bank can feel quietly satisfied
Wednesday 03 March 1999
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.
- 1 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 3 Driving while dehydrated can be just as dangerous as drink driving, study suggests
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
- 5 One Direction: Louis Tomlinson launching his own record label, has already 'signed two acts'
Isis video purports to show beheadings and execution at gunpoint of 30 Ethiopian Christians and destruction of churches in Libya
Rarest Beanie Baby of them all could be sold for £62,500 on eBay
Professional big game hunter Ian Gibson crushed to death by elephant during hunt
Driving while dehydrated can be just as dangerous as drink driving, study suggests
Ben Affleck asked TV chiefs to hide slave-owning ancestry, new hacked Sony emails published by Wikileaks claim
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...