Gauging capacity pressures within businesses

Quarterly Bulletin 2007 Q1
Published on 19 March 2007

By Colin Ellis and Kenny Turnbull of the Bank's Monetary Analysis Division. 

This article discusses the measurement of capacity pressures within businesses - a key influence on the outlook for inflation. The degree of pressure on capacity relative to normal is likely to affect businesses' costs and prices. A variety of different methods are presented, each with their own advantages and drawbacks. Ultimately, no measure of capacity pressure is perfect, and the policymaker's judgement is crucial. 

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