Stephen Miran

In my mind, if you wait to see the result of that, you have waited too long

And there will have been a potentially quite material downside miss to the employment mandate.

Yeah, so I would want to understand why there was an upsurge in inflation and what was driving it, and then sort of think about whether that shock is likely to be persistent or whether the shock is likely to be transitory.

And it's the nature of the shock.

It's not just is inflation higher for a certain number of months, it's why is it higher?

Or why is it lower?

And how long are those shocks likely to persist?

And if you have a situation in which inflation is much higher because there's sort of, let's say, a very significant expansion in national borrowing that drives up demand, could be driven by fiscal, could be driven by something else, that might be the type of thing that you would expect to be to be more persistent in my mind.

If you have the type of shock that's driven by a basically one-off change to tax rates, whether that's a VAT tax or tariffs or anything else, that in my mind is not the type of shock that would lead you to think that inflation is going to be sticky for a long period of time.

And in fact, most central banks around the world, I think actually all of them, would sort of encounter this in a much more direct manner through changes in value-added taxes.

And they always look through them.

You know, they always say, okay, look, the VAT went up or the VAT went down, and that's going to affect the inflation statistics for a period of time.

But then we all know that this was basically a fiscally mandated price change.

And monetary policy shouldn't respond necessarily to fiscally mandated price changes because that's not indicative of changes to the underlying supply-demand balance in the economy, which ultimately drives the type of persistent inflation that the central bank cares about.

Yeah, I mean, it explicitly is.

I mean, look, you know, supply and demand dominates all things economically, right?

And if you're increasing the demand for housing by dramatically increasing population growth without a material increase in the supply of housing at the same time, of course you are going to get upward pressure on shelter inflation.

And then vice versa, if you start decreasing population growth...

because of a change in border policies, without destroying shelter supply, or if shelter supply keeps on expanding at the rate that it has been in previous years, then you get a relative change in shelter inflation once again.

So it's simple supply and demand.