CPI inflation fell to 1.8% last month according to latest statistics, providing consumers with a welcome dose of relief in the horrible economy.
There is hope that the ending of the squeeze on real incomes will boost consumers’ spending power and help get the recovery back underway.
[Central bank economist] said the news was cause for celebration. “We knew our flexible inflation target was a good idea and this has been proved now that inflation is coming back under control.”
[Pensioner lobby spokesman] was cautiously optimistic. “This is an optimistic ray of light for pensioners, many of whom are poor and who you should all feel sorry for. Now if only the bank would unwind its distortionary QE policies then prices would be lower for working people and there would be rainbows and unicorns for everyone.”
Under NGDP targeting, we instead get this:
Nominal income growth declined to 2% last quarter according to latest statistics, suggesting dismal prospects for the recovery.
The continued fall in nominal incomes is likely to dim the prospects for the recovery. This suggests that the Bank of England should be considering more monetary easing, considering that nominal income is getting further and further away from where it ‘should be’ under the Bank’s level target.
[Central bank economist] said that the Bank would not act. “Yes, nominal income growth is abysmal. But we think there are costs and risks to further action. I won’t explain what these costs and risks are, but suffice to say that we won’t be helping anyone.”
[Pensioner lobby spokesman] saw no cause for alarm. “Yes, growth is weak. But forget working people – the real problem is rich pensioners who hold government bonds! The Bank should reduce nominal growth even further to help these people out.”