The second is related to the nature of the economic data that we’ve seen in the first part of this year. I’ve described how inflation rose and unemployment fell. It’s also true that real GDP grew at less than 1 percent at an annualized rate in the first half of the year. And the outlook for real GDP growth has slipped too.
And that, in turn, is why central bankers also need to cross-check financial market signals against other indicators, monetary as well as real economic ones. Inaccurate or incomplete information might lull us into complacency in one situation or drive us to take potentially unnecessary or premature action in another.