Monetary Policy and the Supply Side

Abstract

In this speech, John Vickers, Executive Director and Chief Economist at the Bank, discusses some possible implications for inflation - and hence for monetary policy - of some current developments on the supply side, in particular the ongoing revolution in information and communications technology. He argues that, while prospects for a recovery in UK productivity growth are good, it does not follow that supply-side improvement necessarily implies lower inflation. Indeed demand might rise by more than supply initially. He concludes that, whatever the supply side may have in store, delivering low and stable inflation - and being expected to do so - is how monetary policy can give sustainable growth its best chance.