Dr Wadhwani argued that the potential benefits of business-to-business e-commerce, the likely growth of the IT sector, and the recent pick-up in the trend of US productivity growth were all reasons for believing that productivity growth in the UK would possibly be higher in the coming years. He also felt that pressure on margins would be large and long-lasting, though the size of these effects were necessarily uncertain.
At the same time, Dr Wadhwani emphasised that although “the internet has important disinflationary effects, it does not imply the death of inflation”. Hence, it remained important to continue to monitor a host of other potential influences on inflation when setting policy.
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