Productivity and monetary policy - speech by Spencer Dale

In a speech to the South Tyneside Manufacturing Forum, Spencer Dale – Bank of England Chief Economist and member of the Monetary Policy Committee (MPC) – discusses productivity in the United Kingdom: the life blood of the long-term success for businesses and a matter of great importance to the MPC.
Published on 21 September 2011

Spencer Dale describes why productivity matters for the MPC: it is a key determinant of the balance of supply and demand in the economy and, therefore, on inflation pressure in the medium term. So understanding what is happening to productivity is crucial in assessing how monetary policy should respond to the current weakness of demand and output growth. “The recent behaviour of productivity has been puzzling and worrying in equal measure”, Spencer Dale argues. The level of private sector productivity is now lower than it was before the start of financial crisis more than three years ago, and stands around 9% short of the level it would have reached had it grown at its pre-crisis average of around 2.5% a year.

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