With the benefit of hindsight, at least in our own analysis at the Bank, the complexity of global value chains was not well enough understood and, as a result, the duration and intensity of disruption was probably underestimated. Fortunately, supply disruptions appear to have eased in recent months and there have been some, albeit still tentative, signs of a normalisation in the patterns of US consumer demand. Global goods price inflation has weakened somewhat, and that has passed through into UK core goods inflation. Against that, the end of the zero-Covid policy in China may have again increased the uncertainty surrounding supply bottlenecks. On the one hand, less strict restrictions in China should ease supply constraints if lockdowns are fewer in number. But, on the other hand, the current surge in infection rates may create its own disruption to production and distribution. Ultimately what matters for an inflation targeting central bank like the Bank of England is the implications of these developments for world export prices and thus imported inflation. This is something we will have to  Page 6  continue to monitor closely. Tight labour markets In both the UK and the US, the labour market has remained tight. The UK unemployment rate recently reached its lowest level since the mid-1970s. Recruitment difficulties in a tight labour market have supported stronger underlying wage growth. The relative contributions of demand and supply to labour market tightness are a topic of intense debate.
It is one thing to note that such revisions have affected the historical development of the krona. It is quite another to forecast such revisions and to allow this to influence the forecast for the krona. In my view, the assessment of interest rates abroad on which the analysis in the latest Monetary Policy Update was based was largely in line with market expectations. This means that my view of the future development of the krona in December was based on the assumption that the market would not significantly revise its view of interest rates abroad. Housing prices and household indebtedness may lead to financial imbalances Another important but difficult-to-assess factor that we as monetary policy decision-makers have to take a stance on is the rapid increase in housing prices and household indebtedness that we have observed for some time now. I am among those who are somewhat concerned about this situation. The debate on the role of housing prices in monetary policy has been slightly unclear. As I see it, it is not a question of steering housing prices or other asset prices towards a set target. Nor is it a question of trying to puncture a price bubble by means of drastic repo rate increases. Nor do we assess that financial stability is threatened by the build-up of household debt. This can be seen, for example, if you read our latest Financial Stability Report, which was published in December.