He has managed to persuade The Independent's photographer to snap him in the huge atrium of Liberty's Tudor building behind Regent Street in London. Iain Renwick is jubilant. Inflation itself may no longer be a serious problem but that doesn't mean to say that policymakers now have an easy life. Other difficulties are springing up, suggesting that our old yardsticks of economic success and failure, just like western manufacturing industry, are becoming increasingly redundant.Stephen King is managing director of economics at HSBCstephen.king hsbcib .
Pinpointing some of the key structural changes affecting the global economy suggests that staying on the tightrope is easier said than done. If I am right, the big structural changes now confronting the global economy are making policy decisions more, rather than less, difficult. That means one of the key drivers of consumer spending over the past two or three years may no longer be so supportive.Policymakers always walk a tightrope. They have to work out both the key challenges facing them and also how to confront those challenges.
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That's fine as long as people can afford to repay not just the interest payments but also the capital.However, if people haven't fully worked out the implications of a low-inflation world - not just low interest rates but also low wage growth, something that is too often forgotten about - they may eventually regret the amount that they have borrowed. Because inflation has been low, some central banks have been relaxed about the build-up of debt. Commodity prices may be going up, but labour costs are coming down. Shipping activity may be surging upwards but a lot of this activity is happening because Asian economies are using their cost advantage to increasingly take market share away from more expensive western operations. Which of these changes should a central bank focus on in setting interest rates? Persistent ambiguity in price movements makes life a lot more difficult for those that want to keep our economies on the straight and narrow.Fourth, there is the whole issue of debt. US companies may now have started to create some jobs in the service sector but the manufacturing jobs market remains very poor.Third, the combination of rapid price changes in product and labour markets - in different directions - means that traditional lead indicators of inflation are no longer terribly helpful. As companies do this, parts of the labour market will become weaker and weaker.