Being something of an Anglophile I had been thinking about some lighter material inspired by St George’s Day for this afternoon, but I see that John McDermott has beaten me to it.
My only brief comment for now on John’s speech is on this paragraph:
We remain vigilant in watching wage bargaining and price-setting outcomes. Should these settle at levels lower than our target range for inflation, it would be appropriate to ease policy.
Perhaps I’m misreading this, but surely the Policy Targets Agreement now emphasises the midpoint of the target range. If the Bank had suggested, in the mid 2000s, that it would tighten only when wage bargaining and trend price-setting outcomes got to levels consistent with inflation above the top of the range then I think quite serious questions would have been asked (and rightly so). And in those days there was no reference to the midpoint in the PTA.
And, rather than post this just on my other blog, I’ll leave you with the link to the fuller story of St George, and the faith and courage that inspired the dragon story.
croaking cassandra 
I wouldn’t get het up about these little technical details Michael. After all, the Eurozone came in under their inflation target by 0.6% and they seem to be doing just great!
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It is a little sobering that the word “deflation” does not appear in the speech at all – not even to explain why they (presumably) think there is little or no risk of it here.
My own view is that a falling exchange rate would be a big protection for a time anyway. If our OCR were cut to zero – far from inconceivable in the next easing cycle, based on past precedent – we would see a very weak exchange rate, and quite a bit of imported price inflation for the first year or two.
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