By Richard Barwell of the Bank's Conjunctural Analysis and Projections Division.
Net inflows of migrants have accounted for the majority of UK population growth over the past decade. Migrants who travel to the United Kingdom to work increase the supply of labour to UK companies, and indirectly encourage them to invest in more machinery and equipment, thereby boosting the supply capacity of the economy. Migrants also add to the level of demand in the economy. The issue for monetary policy makers tasked with maintaining control of inflation is how migration affects the balance between demand and supply, and that is likely to depend on the nature of the migrant inflow. Recent migrant inflows appear to have had a slightly larger impact on supply than demand, and may therefore have depressed inflationary pressures in the economy.