Monetary policy: navigating rough waters - speech by Martin Weale

In a speech delivered at the Hart Brown Economic Forum, Martin Weale reviews the outturns for inflation and growth compared to the first forecasts he contributed to as an MPC member: growth has been weaker and inflation higher than expected.
Published on 21 June 2012

In considering the economic weakness that the UK has experienced since the first quarter of 2008, Weale looks at poor productivity performance as a key counterpart. He says that the causes of this weak productivity growth are not known, and that it is impossible to take a view on whether it is supply or demand driven. Weale says that the more important question for the MPC is whether a sharp increase in demand would prevent inflation from falling back to target or not. He states: “I am very doubtful that the productivity ground we have lost over the last four years would be fully, or even largely, recouped if there was a sharp increase in demand in the near term...But it is rather more likely that productivity would start to grow at something like its trend rate if demand were more buoyant and the easing of inflationary pressures reduces the risks associated with this.”

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