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Role of the Bank & the economic outlook

Role of the Bank & the economic outlook. Glynn Jones Agency for the West Midlands & Oxfordshire NAVA Conference – 25 September 2014. You aren't signed in Sign In Help. The FPC. House prices continue to rise. The share of new mortgages with LTI multiples above 4.5 has risen to a new peak.

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Role of the Bank & the economic outlook

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  1. Role of the Bank & the economic outlook Glynn Jones Agency for the West Midlands & Oxfordshire NAVA Conference – 25 September 2014

  2. You aren't signed in Sign In Help The FPC

  3. House prices continue to rise

  4. The share of new mortgages with LTI multiples above 4.5 has risen to a new peak New mortgages advanced for house purchase by LTI

  5. Overview

  6. GDP – output by sector

  7. Growth and inflation outlook little changed from May GDP CPI Based on market interest rate expectations and £375 billion purchased assets

  8. But unemployment has fallen far more quickly than expected

  9. The MPC expects gradual and limited rate increases A view broadly shared by markets

  10. Bank Rate likely to remain below pre-crisis average for some time Due to higher credit spreads and global factors Credit spreads Global long-term real interest rates

  11. Demand

  12. Global annual GDP growth moderating % 20 15 10 5 0 -5 -10 US Japan Euro area China India -15 2005 2007 2009 2011 2013

  13. Household consumption growth has been outpacing income growth

  14. Housing market activity has fallen back a little

  15. Surveys point to continued strong growth in business investment

  16. More fiscal consolidation to come

  17. Supply

  18. Unemployment rate falling so slack reducing…

  19. …but wage and productivity growth are weak – suggesting more slack than expected Private sector nominal earnings and output per worker

  20. Participation much stronger than expected

  21. Productivity puzzle intact: partially explained by mis-measurement and the financial crisis

  22. Benign inflation environment

  23. Summary - August projections(a) GDP CPI (a) based on market interest rate expectations and £375 billion purchased assets

  24. Inflation Report – August 2014 www.bankofengland.co.uk/publications/inflationreport/index.htm

  25. Table 1 Averages of other forecasters’ central projections(a) Source: Projections of outside forecasters as of 28 July 2014.

  26. Chart A Inflation has fallen more quickly than expected

  27. Chart B GDP growth has been stronger than expected

  28. Labour costs and recruitment difficulties Labour costs Recruitment difficulties • Settlements up modestly on last year • Fewer pay freezes • NMW pressure after October • Recruitment and retention pressures rising • Other pay elements picking up • Performance better than expected, boosting variable pay • But change in composition or work forces pushing other way • Auto Enrolment will increase costs for small firms

  29. Labour market – leading indicators Vacancies Salaries of new recruits Sources: Bank of England, BCC, Income Data Services, KPMG/REC/Markit, the Labour Research Department, ONS and XpertHR.

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