Interpreting movements in market rates is, however, complicated by the fact that other factors influencing yields have not been constant. First, the recent run of UK data has been unusually strong relative to market expectations. That should generate upward pressure on market interest rates as, other things equal, a reduction in the degree of monetary stimulus would indeed become appropriate sooner if growth turns out stronger than expected. Bank staff have constructed a time series for the news in the incoming data by calculating, for 14 different data series, the deviation of the outcome from the market’s expectations (as recorded by the median expectation of economists polled by Bloomberg), normalised by its standard deviation. An aggregate timeseries measure can then be obtained by taking an (unweighted) average across the most recent observations for each series. Chart 6 shows such a measure back to 2006, together with analogous series for the United States and the euro area. The series for the United Kingdom recently reached its highest level over this period, emphasising just how much upside news there has been here recently. Moreover, although both the United States and euro area have also generally seen upside news of late, it has been nowhere near as strong as in this country. Market interest rates should therefore have been expected to rise, and by more here than in the other two jurisdictions.
Charles Bean: The UK economic outlook Speech by Mr Charles Bean, Deputy Governor for Monetary Policy of the Bank of England, at the Society of Business Economists Annual Conference 2013, London, 22 October 2013. *  *  *  Good morning! It is now more than five years since Lehman Brothers collapsed, ushering in the worst phase of the financial crisis, followed by a sharp and synchronised contraction in global economic activity. While growth was reasonable for the first year after output troughed in the middle of 2009, the pace of expansion since then has proved disappointingly weak. Just how disappointing is illustrated by Chart 1, which shows our August 2010 Inflation Report projection for GDP growth, together with the ONS’s present estimates of what actually happened. It is not a pretty sight. Whereas our central expectation was for a cumulative rise in output of 9% over the following three years, the actual rise is presently estimated to have been a miserable 2%. And we weren’t alone. The performance of other forecasting outfits was pretty similar. At a global level, a similar story can be told. The IMF has consistently revised down its projections for global growth. Back in October 2010, it was forecasting a cumulative expansion in output of 14% over the following three years, whereas the actual figure was just 10%. Indeed, the Fund has revised down its world growth forecast for 2013 in every subsequent World Economic Outlook: it now expects just 2.9%, against the 4.6% it projected three years ago.