Corridor of Uncertainty
The article is compared to the corridor of uncertainty which in the context of cricket is a difficult to play when ball pitches in that corridor. It is in other words a dilemma as to what to do. Mr. Haldane speaks about how the UK had dealt with the recession crisis from 2007 and prevented it from getting worse. The actions taken had prevented a 6% of GDP blow to England.
The dilemma which is discussed is as to whether to wait till the sources of uncertainty is over or to take appropriate measures before it is too late. When UK was in deep recession, the Bank of England made a bold move of Quantitative easing which includes purchase of assets worth £ 375 Billion so that there is an increased money supply in the market. This monetary policy along with a cut in interest rates adopted by the UK government was highly effective in pulling out UK from a depression which would have otherwise happened. The GDP growth rate was pegged at 3% in 2013 which was the highest among G7 countries. Also, inflation seemed to drop to a healthy 1.5% and unemployment was at the minimum.
However, problems keep arising and there are more uncertainties that loom large. The fact that the productivity if labor has fallen down over the years has been a great cause of concern. The other uncertainty is that to bring the interest rate back to normal which will affect half a million households. Also, the GDP is expected to grow at 1.4% to 5.4 %. Anything below 3% would be considered a dismal performance by the economy.
Mr. Haldane then talks about how to operate in the corridor and the three factors the UK economists have to be wary about in the coming years. Deflation is discussed first with Japan as an example. Japan has not seen any nominal GDP increase since a while and the prices of commodities has been falling at 1% every year. A similar trend has been voiced in