The proportion of enterprises in manufacturing and services which say that labour shortages are limiting their output has never been so high. The result is stronger wage growth, which is contributing to an increase in inflation. Several measures of underlying inflation have apparently passed the turning point. I say the word “apparently” as monetary policymakers should be cautious in their judgements1.
The estimates of slack in the economy differ widely and are often corrected. Model results, as complex as they may be, should be treated with the requisite caution. In the end, assessments based on experience continue to be an essential part of monetary policy decision-making.