Interest rates and global rebalancing - a debate on twitter

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Yesterday, following on from the MPC's Inflation Report, we got into a debate on twitter with Tom Brammar, MD of FT Tilt about the path of interest rates.

Below is a transcript of the debate:

Message from Tom Brammar (@tombrammar)
I agree with King. What UK is experiencing is not traditional inflation. Jobless recovery = no wage pressure.

Our response (@EEF_Economists)

Not seeing wage pressure yet, but just how responsive to upswing in demand is a labour market where 1/3 of unemployment is long-term?
From @tombrammar
This is global, not just UK. Global economy is suffering from excess manufacturing capacity and a deficit of consumption.

From @EEF_Economists

Over what time frame do you think deflation is a bigger risk? Don't see commodity price pressures falling away quickly…It's not just the amount of spare manufacturing capacity either, but its responsiveness. Lots of "sticky" supply chains post-recession

From @tombrammar

If commodity prices climb higher and higher, the American and European worker will tend to spend (cont)

From @EEF_Economists

That neglects that growth in Emerging Markets (EMs) could lead to increased EM consumption = good for growth of developed market exports & global rebalancing

From @tombrammar

Good point, though I get a sense that EMs are consuming more goods from other EMs than the developed world.

From @PresidentALJ

UK exports to the EMs rising at a cracking pace though

From @tombrammar

True, though I would argue that the UK businesses that make these exports are small employers of UK workforce

From @EEF_Economists

Regardless, it's better for the health of the UK economy if those companies are growing their exports

From @PresidentALJ

Well I guess 'small' is subjective but the point is its growing - and rebalancing the economy by doing so…and not just growing but growing fast in a way that is surely more sustainable than previous decades growth


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