Andrew Bailey: The economic landscape - structural change, global R * and the missing-investment puzzle

Speech by Mr Andrew Bailey, Governor of the Bank of England, at the Official Monetary and Financial Institutions Forum, London, 12 July 2022. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Thank you. It is a pleasure to speak at this event hosted by the OMFIF. In challenging times like those we are currently facing, the independent platform you provide – which brings the public and private sector together to discuss issues relating to central banking, economic policy and public investment – is more important than ever.

The dominant theme for central banks around the world currently is the very elevated level of inflation. The Bank of England is certainly no exception, with UK CPI inflation reaching 9.1% in May, and projected to increase further to slightly above 11% by October.

In view of continuing signs of robust cost and price pressures, including the current tightness of the labour market, and the risk that those pressures become more persistent, the Bank's Monetary Policy Committee voted to increase Bank Rate by a further 0.25 percentage points at its latest meeting in June. This was the fifth increase in rates since December, taking Bank Rate to 1.25%.

In the Minutes of that meeting, the MPC emphasised that it will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit. The scale, pace and timing of any further increases in Bank Rate will reflect the Committee's assessment of the economic outlook and inflationary pressures. The Committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response. Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts.