I just saw the latest perspective from the Bank of England, which is quite interesting. Chief Economist Pier suggested that the current inflation situation is actually much more optimistic than in 2022.



What is the underlying logic? Mainly, there are still many idle resources in the labor market that are not fully utilized. These idle capacities can actually help absorb cost pressures, thereby easing the upward momentum of inflation.

Compared to the high inflation environment of 2022, the market structure has indeed changed now. The loosening of the labor market means wage growth may not spiral out of control like before, which is a positive signal for price stability.

Interestingly, this reflects a gradual adjustment in the central bank’s assessment of the current economic situation. From being highly cautious to relatively optimistic, it is based on a reassessment of labor market dynamics.
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