But in a global economy, employers can effectively import talent from abroad rather than pay domestic workers higher wages. Suddenly you have a bigger labour force so the pressure that would create higher wages doesn’t exist to the same extent. This is something which Mark Carney spoke about a year ago at the annual central bankers get together in Jackson Hole. However, this hasn’t yet led to any major rethinking of the Bank of England’s framework.
The other global aspect is the impact of imported prices. These have skewed inflation in the past in ways which were hard to assess at the time. Throughout the Noughties the UK’s CPI inflation was remarkably stable around the Bank of England’s 2pc target. These were the halcyon days of steady economic growth and inflation.
But there was something more unsettling going on under the surface. In the UK, and other countries, unemployment was low and consumption very high. This should have pushed up inflation, according to the Philips Curve. Prices should have risen as sellers realised that they could sell their goods for more because people’s incomes were increasing. But domestic sellers suddenly had to compete with China whose share of exports rocketed in the early Nineties from 2pc to 10pc.
Global manufacturers flocked to the country because of low wages and the cheap currency. This meant that consumers around the world could buy goods at lower levels than they would otherwise have been able to. This caused prices to fall.