Ex-BOE Policy Maker Forbes Urges a Rethink of Inflation Models

The transcript discusses the need to rethink how inflation is measured, suggesting that current models overpredict inflation due to a narrow focus on domestic factors. It emphasizes the importance of considering global economic integration. The discussion also covers the lack of a precise natural rate of unemployment (Nehru) and the need for broader economic indicators. The conversation touches on monetary policy, suggesting a focus on core inflation rather than temporary spikes, and addresses concerns about asset bubbles, advocating for macro prudential policies.

What analogy is used to describe the need to fix economic models?

• A broken compass

• Prince Henry's astrolabe

• A misaligned clock

• A faulty thermometer

What is a key factor that should be considered when understanding inflation, according to the first section?

• Local consumer behavior

• Historical inflation rates

• Global economic integration

• Domestic economic policies

What is one reason for the lack of convergence in the Euro area, as discussed in the second section?

• Over-reliance on domestic variables

• High unemployment rates

• Strong currency value

• Excessive government spending

What is a challenge in measuring unemployment accurately in the US?

• Low participation in the labor market

• Inconsistent data collection

• High inflation rates

• Fluctuating currency values

What is a potential risk of accommodative monetary policy mentioned in the third section?

• Increased unemployment

• Rising asset bubbles

• Lower interest rates

• Decreased consumer spending