George Osborne

Unemployment cannot fall much more in Japan, the UK and the US without inflation rising. The actual growth of gross domestic product therefore needs to slow, through a decline in the strength of demand, to each economy’s trend growth rate. Monetary policy will be dangerously off course if central bankers are too optimistic. This is a high risk as consensus estimates for these trend rates are way above those indicated by recent changes in labour productivity (table one). The Bank of England, for example, predicts that GDP per hour worked will rise over the next two years to nearly two per cent per annum. Read more

Olivier Blanchard, chief economist of the International Monetary Fund, has egg on his face. He attacked George Osborne, the UK chancellor of the exchequer, for seeking to reduce the UK’s fiscal deficit too rapidly, claiming that it would prolong recession. Mr Blanchard has had to admit that he was wrong but his admission has been reluctant and ungracious. (This is the same mistake that cost former UK culture secretary Maria Miller her seat in the cabinet this month.) Read more