Taylor-made interest rate relief

Article Abstract:

Interest rates are set by the Bank of England in the United Kingdom according to forecasts for inflation two years ahead. Stanford University's John Taylor proposes that short-term interest rates are linked to the output gap, inflation and normal real interest rate levels. UK rates could rise, if Taylor's methods are accurate, though futures markets forecast higher rates that those forecast using the Taylro rule. The futures market may be biased due to hedging activity, though there is no guarantee that the Taylor rule gives a better forecast.

Economic forecasting

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The true interest rate question

Article Abstract:

Economists are divided on whether United Kingdom interest rates will rise or fall. NatWest Markets' Geoffrey Dicks sees rates as likely to drop because economic growth will slow in 1998, easing inflationary pressure. Goldman Sachs' David Walton sees a rate rise as necessary to control inflation, and Merrill Lynch's Paul Turnbull sees skill shortages as likely to lead to wage inflation. There is agreement that economic growth will have to slow and unemployment to rise if the government is to achieve its target for inflation.

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Wages threaten interest rates

Article Abstract:

British interest rates may not be reduced due to concern about wage rises and their possible inflationary impact.

Wages, Wages and salaries

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