The Office for Budget Responsibility is created in Britain (GIANT) – this (not)dependent organization (sorry, I could not resist. I can't believe that, that this is not a political move) which will issue budget forecasts. Here , and here they are . The document is large and takes time to read. At the moment it is important to know, that the forecast for economic growth was underestimated (pier, the previous government deliberately inflated forecasts. somewhere we already heard it ..). By the way, tax revenues improved slightly, which slightly reduced the need to issue debt, what the markets liked very much.
Here is a basic prediction.
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What you want to pay attention to first of all, this is the GDP gap.
As seen from the graph, previous prediction of the bad guys" was slightly worse. At this point we turn to the second British topic. – Inflation.
For now, a few words about the GDP gap. Much of the gap calculation is based on unemployment. But, in post-boom periods, some jobs go away forever, What means, that the full load of resources based on the new structure of the economy will be less, than when basing on the old pre-bubble structure.
From here – Central Bank expects, that inflation will be low since the GDP gap is large. If the Central Bank overestimates the size of the negative gap, then the reaction to inflationary pressures will be belated. By the way, this is the most real reason to be afraid of high inflation., not monetary – look in the forum, afraid, but we don't think.
What happens to inflation.
1) The Barclays Survey of Inflation Expectations (BASIX) – inflation expectations survey showed, what are the british waiting for 3,4% in a year, in two years 3,8% what is the maximum with 1995 of the year.
2) UK inflation will be published tomorrow, all kinds of rumors are crawling around the market about, that rising expectations – this is what pushes inflation up, therefore the Bank of England will think and do something.
and now, from the Bank of England – schedule how expectations and actual numbers compare (By the way, for the US, expectations are even less useful).
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And the third. (short-term financing facility for the non-financial sector)!
The Bank itself said:
Although there were no asset purchases financed by central bank reserves, the Bank continued to purchase sterling commercial paper and operate as a buyer and seller in the sterling corporate bond market, with net purchases financed by the issuance of Treasury bills.
Ie. no QE, just needed to support the market in difficult times. But still, interestingly;)
