The Wall Street Journal writes about how the Bank of England is now referring to the ‘output gap’ as the key monetary policy metric. The gap is an estimate of the difference between actual GDP and potential GDP and has long been a stalwart of Bank of Canada monetary thinking.
Mervyn King, Mr. Carney’s predecessor at the BOE, frequently told anyone who asked that estimating the size of this gap was a mug’s game as it was almost impossible to gauge it accurately.
The Bank of England estimated that gap at 1-1.5% of GDP today.
