UK unemployment:

Although quarterly growth rates of GDP may soon turn positive in the United Kingdom, unemployment is likely to remain high. Fortunately, it has not increased to the 10pc rate now experienced in both the United States and the euro area. But at just under 8pc, it is markedly above the level to which we had become accustomed during the period known as the "Great Stability."

UK public finances:

A key element in raising the national savings rate is the elimination over time of the structural deficit in the public finances. Of course, there is a perfectly sensible debate about the appropriate timing of the withdrawal of the temporary fiscal stimulus as the economy recovers.

Mr King quotes Ben Bernanke, the chairman of the US Federal Reserve, on the importance of sound public finances: "unless we demonstrate a strong commitment to fiscal sustainability in the longer-term, we will have neither financial stability nor healthy economic growth." Mr King then goes on to add that the Chancellor has made clear that the Spring Budget provides the opportunity to do precisely that.

On economic data:

Ten years ago, I described how movements in macroeconomic data can sometimes bear a "resemblance to old-fashioned disco dancing - sharp movements in unpredictable directions, creating much excitement, accompanied by a good deal of noise." Over the next few months, the data are likely to be dancing particularly vigorously under the influence of the reversal of the VAT cut, a turnaround in the stock cycle and even the effects of the recent cold weather.

On the outlook for UK households:

The patience of UK households is likely to be sorely tried over the next couple of years. There is little scope for growth in real take-home pay, which may remain weak even as output recovers.

On inflation:

Provided monetary growth remains well under control - and remember that at present it remains undesirably low - inflation should return to target in the medium term. I hope you will remember that in both of the past two years inflation picked up as a result of temporary price level factors and then fell back, as the MPC had predicted.

On global imbalances:

The economic message from this crisis is clear: low-savings countries will reduce their net borrowing from abroad and so will no longer be able to play the role of consumer of last resort. To maintain levels of economic activity, high-saving countries must expand their domestic demand and allow their trade surpluses to shrink.

For the full story visit  www.telegraph.co.uk

Bye for Now

 

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