By Mark S Astley of the Bank’s Structural Economic Analysis Division and Andrew G Haldane of the Bank’s Monetary Assessment and Strategy Division.
The monetary and credit aggregates are among many indicators used to consider future prospects for inflation. This article assesses the information contained in money and credit about future real activity and inflation. Some of the sectoral components of money and credit are found to have explanatory power over certain disaggregated components of spending. But none of the aggregates is sufficiently reliable to justify looking only at money when formulating an inflation assessment.