Bank of England holds press conference on interest rate increase

Now, since the February report, the news on these indicators has been mixed, there are some signs that the labor market is listening a little, although at a slower pace than we expected in February; However, it remains tight, employment growth has been partially met by an

increase

in labor market participation, especially among the youngest, the number of vacancies has decreased from very high levels and graph five shows the relationship between Vacancies and unemployment, which is a key measure of labor market tightness, have similarly declined as a result. Employment flows have declined somewhat in the most recent data, in line with data that companies across the UK are telling our agent network that recruitment difficulties have eased in recent months, employees are changing jobs less frequently and employers are receiving more applications for vacant positions.

Nominal wage growth is shown in chart six and has also retreated slightly in line with our February projections. Short-term indicators, such as HMRC payroll data in the KPMG Rec Wage Index, suggest wage growth could slow further later this year and we hear the same from our Agent network, while Service price inflation in Flat 7 therefore remains broadly elevated, as expected in the February report, this may reflect some rebuilding of margins, as well as wage growth and indirect effects. of the higher costs of energy and other inputs, to the extent that Companies have already overcome that higher costs will influence the pace at which services inflation decreases, so CPI inflation is expected to fall significantly to as energy costs begin to decline, although at a somewhat slower pace than projected in February, given the near-term outlook for food. prices, longer-term inflation prospects are more uncertain and depend on the degree of persistence in wage and price setting, as shown in Chart 8 of the MPC's modal reference projection, which is conditional on an implicit path in the market for the

bank

rate

which peaks at four and three quarters per cent in the fourth quarter of the year a growing degree of economic slack combined with lower external

press

ures leads to inflation falling materially below the two per cent target in the medium term, but the committee continues to consider that the risks to inflation are significantly skewed to the upside, mainly reflecting the possibility of greater persistence and fixing of domestic prices and wages, we believe that the elimination of second round effects may take time more than arising;

However, the current circumstances are so unusual that it is difficult to be precise about the consequences of the degree of this asymmetry, so we have not included it in our reference modal projection, however, the MPC considers that, relative to the projection of significant falls in inflation to below-target levels, significant upside risks remain in the medium term, reflecting those risks conditional on the implied market path for

bank

rate

s the average path forecast by the NPC for inflation is at or just below the two percent target in years two and three. I want to emphasize the point that having those large upside risks on inflation does not call inflation compliance into question.

The target of our projection using market rates is now that upside risks may not materialize, so the NPC's baseline modal forecast remains that inflation will fall below target in the medium term, conditional on the path of the market for the bank rate, the return to the transmission of monetary policy. Now he is working to reduce inflation. Changes in bank rates appear to have passed through, as would be expected, to new mortgage and corporate lending rates. Overseas bank failures have resulted in asset price volatility since the February report and spreads on UK banks' wholesale funding have

increase

d, but this was short-lived and had little impact on rates.

interest

rates faced by house

holds

and businesses, while the impact on household deposit rates has been moderate, rates on term deposits and fixed rate bonds have increased further in line with the changes In benchmark rates, these changes continue to work their way through the economy, for example, why we have seen higher rates on new mortgages.

Illustrated here by the rates on a new two-year 75 loan for Value mortgages, which is the blue line, as well as the effective rates on new mortgages. more generally, which is the orange to red line, the effective rates on the entire existing stock of mortgages, which is the purple line, are still recovering given the delays in the transmission of monetary policy, the increase in rates banking from December 2021 will weigh more on the economy in the coming quarters and the MPC takes this into account in its policy decisions, the bottom line here is that during this period of time the mortgage market has changed to be a more fixed rate market , so let me conclude with Marshall's policy decision today in this meeting.

The committee has voted to increase the bank rate by 0.25 percentage points to four and a half percent; CPI Inflation The pace at which inflationary

press

ures ease will depend on developments in the economy, including the impact of significant increases in bank rates; So far, uncertainties around the global financial and economic outlook also remain high; The NPC will continue to closely monitor signs of persistent inflation. inflationary pressures, including tightening labor market conditions, wage growth behavior and service price inflation, if there was evidence of more persistent pressures, then further adjustment and monetary policy would be required, the MPC will adjust the bank rate as necessary to return inflation to target. sustainably in the medium term in accordance with his mandate, so thank you and with that, Ben Dave and I will be happy to take your questions.

Usual process for questions. Once you contact them, let us know your name and where you are. If you're from and if you can limit it to one question a piece so we can avoid everyone we'll start with ED and then sue thank you Ed Conway from Sky News in a sense some people would say you know this is. the biggest test of the banks, the bank since it became independent, this increase in inflation, the increase in

interest

rates, what would you say to those who say that it is effectively failing that test by not seeing the increase in inflation, not seeing how sticky it is?

Now you are at the top and don't understand the nature of food price inflation. Do you think those flaws matter to your ability to maintain credibility? Well I think you're right about that, the backdrop to this is that the shocks that have been hitting the UK economy and of course the global economy as well; We need to look at it through that lens as they have been much larger, so we have set up these shocks and of course I have referred to many of them in my opening remarks, the most important of which is the impact of the terrible war in Ukraine on energy and food prices, there is no doubt about it and of course the test of this regime is how we treat them and how we return inflation to target now.

I think you can look at that through two lenses, so one is what's causing the shocks and the second is knowing how those shocks are anticipated and then how we manage them in terms of returning to the inflation target because that The objective of the regime is obviously that we have sustainable inflation in the medium term with a low and sustainable target inflation, that is what we are doing. We have to know that we have to adjust from meeting to meeting as we watch the news. I'll choose a news story you mentioned. I think the point about food prices, let me say that there is a very large underlying shock in food prices and you know, we show the graph that shows the same thing happening.

In Europe as a whole I now think that the news we have had is not about persistence in the sense of long-term persistence, but about the question of how, at what point does this shock work its way through the system, if want, and how. We hope that what we're hearing will quickly dissipate, and as I said, I'm hearing it across the country, which I've been doing a lot since the last time we were here, is an expectation that we will see a reduction in the amount of food. and food inflation, in fact, we are already seeing some of that start, but it is taking longer and the reasons I hear it is taking longer sometimes have to do with the impact of energy prices and production food, sometimes they have to do with, you know, hedging, hedging approaches that have been used at the commodity price level, so even though, as I said, commodity prices started to fall on last year, now it is taking longer to recover.

I think in a sense I'm happy to debate how much of that is predictable and how much of that is emerging, but those are the things we have to deal with and yes, we revise our views as we see new evidence. I think that's appropriate, so thanks hi Sue Chan from the Telegraph, I'm just following that. I mean this is the biggest improvement to their growth forecast in NPC history. What would you say to people who say that in the past the Bank of England has been too pessimistic and limited to food prices, given the work it has done on prices? set out behavior and how it has changed do you think supermarkets have been as quick to reduce prices as they have been raising them, well just an upward revision? um and Ben may want to weigh in on this as well.

I mean, if you look at what happened, let's take going back to when we were sitting here in November, there was a very substantial drop in energy prices. I mean, the biggest news has been a very substantial drop in gas prices and that is clearly conveyed and conveyed in a positive way. You know, we took into account that which was not anticipated. Let's face it, when we were sitting here in early November, we were looking at the prospect of a very difficult winter. You know, there was some likelihood that Europe was going to experience periods where gas supplies could be restricted, it all looked very bleak and that was reflected in the prices and it turned out not to be as bad as expected, so that's news, the Second piece of news, as I said, is that we have obviously, at this time, taken into account the measures that were introduced in the budget, which has happened since February and yes, that has a positive effect on this, without a doubt, on the next year, in third place.

Global conditions have improved, so I'll give you another example of that, you know, the impact of China ending its zero concealment policy. I think it's been a lot more subdued than people expected it to be and the fourth factor, like I said, is not here. I think we know. Let's say yes, we understand this, I think the economy has turned out to be more resilient to this than we expected, so you know all those things come together and you know it's appropriate for us to review, can I clarify? I mean, I'll depress it a little for a moment, if you don't mind.

I mean, yes, it's a very big upward revision, but the level of growth is still very weak, let's be honest. I mean, we have to look at both. We have to analyze both the change and the level here. I think I mean getting the right position, just in supermarkets. I mean, I don't want to comment on um sectors because, frankly, we don't have what I. I would call sort of consistent data, I would say in the aggregate data and, um, I would prefer to publish this chart this morning, which we also have, what is the aggregate position for the UK as a whole and it's interesting look at it because it doesn't tell the same story that, for example, the somewhat similar graph that the ECB has published for the euro area, so you don't see the same picture in terms of the contributions, the contributions of the components, yes, and in the aggregate graph it shows that there is no increase in national income gains, it is the comparison with Europe, where it is slightly different only in the general nature of the forecast, one must remember that it was said before, these are conditional forecasts, so when conditions change, The forecast may change.

There are other reasons to predict changes, but that is certainly important and you say again last August, I mean, petrol prices were close to £500 a therm now they are 80. What that means is that if we look towards the future, billsHousehold energy consumption now exceeds four percent. lower projected income than they were in the August forecast partly because we assumed that those prices would remain the same and now they have gone down, but I want to say that it is a huge change in the supposed conditioning that gives a big boost to the economy. I think that's why you've seen a significant improvement in growth in Europe and continental Europe, as it happens, the timing of that turn here and in the euro zone was precisely when the wholesale energy process started to hit its nadir, in september october, and high frequency growth measures like the pmis and interestingly you haven't seen the same increase in the US because you never saw the same increase in energy prices in the united states , so this is a really important reason for the change in growth in both the data and the forecasts and By the way, another conditioning assumption that is different in August and November compared to now is that the trajectory of the market of the interest rates is also low enough, so one should always remember these things and want to remember more generally the conditional nature of the forecast that we make and if I can just put some numbers to Andrew's point, I mean, as he said in your opening comments, we are now forecasting grapes at a quarter percent annual average this year, three quarters of a percent next year, that's in the table on page 28.

That's an increase from February, where we had two results negatives, so we've gone from, you know, minus half this year minus a quarter next year to two small positives and that reflects, I mean, we've been constantly emphasizing that the economy has been hit by these negative sharks . What has happened to energy prices more recently is a positive shock to the global economy for the UK economy and us. We've also seen this very resilient labor market. We now forecast that unemployment will remain below four percent this year and we know that we are starting to see some improvement in inactivity, which was another negative shock that we called, it's more concentrated in students at the moment, but these are underlying developments positive, but they occur in a context of growth that is still very or relatively weak compared to the history, but it is that type of context that has allowed us to revise our growth projections Phil and Marine, hello. mate, drink on Bloomberg um, so energy prices have fallen, but your inflation forecast is actually higher, you have repeatedly underestimated where inflation will be and how far rates will have to go, um, the markets have been right and you don't, it's just that's a good conclusion from this and I mean in November you said that the rates would be at the other point that we are going to have rates from five percent at the end of this year to one percent at the end of the two-year forecast, do we need to do more or less with rates?

How do we read that correctly? Can I answer the second question first because I think it's a very important point? very clear in the guidance and we have repeated the language that we used this time in committee in March that we will be guided by the evidence, so I want to be very clear about that: we are not giving what I would call directional guidance. To control rates today, as we didn't do last time, we will be guided by the evidence and that is very important now that we have repeated the point that we have made before, which is if we see more signs of greater persistence, then um of course. , we will have to act, but let's be very clear and it goes back to what Ben was saying before: it is a conditional statement, it is not an unconditional statement, it is a conditional statement, in other words, it sets out the conditions under which we would have to act.

Take action, but to be very clear, we are not giving any direction, this time we are relying on evidence. I will now comment on your first question. I don't know, I don't know if they want to participate too. and this is the news that we've had on inflation and you're right, inflation is just under one percent higher right now than we expected it to be in February, interestingly as I said in my comments, that difference Actually, it's not really about the lingering element of inflation, so if we look at Services, if we look at um, we'll know that salaries, wages and compensation are actually pretty much in line with what we brought in in February, the news is mostly about food and clothing um and certainly yeah, I mean food inflation has been more persistent than we thought it would be.

I will just repeat the points I made before. It seems that this time food price pressures are taking longer to work their way through the system than we thought. I expected it, but as we said before, we are not you, these are very unusual times. I mean, the models have to be treated with caution here because the transmission of these types of impacts is very uncertain. Yeah, I just want to look at them and I'm not sure the market got it right, we have a market breakeven rate for RPI inflation that certainly a year or two ago wasn't predicting 10, so I don't know, wait, I don't think, wait, can?

Just answer yes, I thought you meant uh no, I don't think that's true, you talked about inflation, although I thought you said the market is right, we're talking about inflation. I didn't think well, unless we deal with the inflation issue, um and we. I don't predict interest rates, so I'm not sure where that comes from, but inflation, uh, yeah, the markets certainly didn't expect anyone to expect 10 inflation a couple of years ago. At this point I want to mention some of the context of Ed's question. Also, the big picture, so the scale of these increases and the import prices that we had 21 22, particularly last year, are enormous by historical standards, Generally speaking, it depends a little on how you measure them, they cost the UK as a whole around five per cent. of income, that's by how much more than five, I guess.

I had a talk a few months ago where I tried to quantify, I think it was about five and a half percent of the number in the year to the third quarter of last year, which I think is about twice or even more than double the impact. of the rises and oil prices in the mid-1970s, now at that time and general inflation went up and this is the point I wanted to come back to in terms of Ed's question about the outcome. There was a big increase in inflation expectations overall in the medium term that hasn't happened now we saw these breakeven rates.

Medium-term inflation rates were expected to rise quite a bit, but actually peaked over a year ago, but are still too high for our liking, but nothing like the response of the 1970s and that It is the value of this regime and you are absolutely right, it is essential that we maintain that value and maintain that credibility and the task, as Andrew said, is not to somehow predict that the war was going to happen or even its consequences for supplies of energy and food because I'm not sure it's possible, is to respond and respond to any part of the city that maintains this credibility and ensures that inflation returns in a sustainable way. two percent and that's what we'll do, can I give a point?

Page 89 of the report has a chart that we always have at the end of our report that compares our forecast to the average. of the forecasters' projections and you know what you see there is that for the second quarter of next year our modal projection for inflation is actually a market that is noticeably above the average of the external forecasters. Interestingly, for the next two years we are below, but I made the points about the way the committee had looked at, yes, we also included a median projection that has inflation bias if you were to compare our median projection to the outside of the forecasts. average and, by the way, we don't know.

To what extent do these external forecasters use means and modes? I can't tell you the answer to that question. Actually, our average forecast is pretty much the same as those things, so you know, it would just back off a little bit on where we are relative to the outside world. Dave, sorry to interrupt you, I was just going to focus on the very short-term forecast and obviously recognize that the assumed drivers for those short-term forecasts can change as well. You know, we have to deal with the full range of shocks as they occur. develops negatively and now, more recently, positively, but just to highlight, I mean, now we put these numbers in table 1.

C on page 25 we expect inflation to fall to 8.2 in the second quarter, so which is actually slightly below what we had in February forecast now is because energy prices and the extension of the energy price guarantee are supporting things moving in the opposite direction, although it is this recognition that food price inflation has been higher than ours and I think others thought, so you have those There are two offsetting factors and we are trying to be transparent about the trajectory of inflation. It's clearly too high right now, as Andrew emphasized, but we see it starting to decline sharply starting in the second quarter and then falling for the rest of the year and below target. two years from now, so in a sense, those who are relying on the current conditioning assumptions and are forecasting judgments, that's the way to frame the way we're approaching this, as Ben says, although if we look at those measures based on the market, for example, the break-even points, I don't get the sense that there is any kind of challenge to the credibility of the framework that we are seeing, we are not seeing that unanchoring of medium-term inflation expectations in the markets, which would be something that would go more to Ed's emphasis on credibility that we're I'm sure Marine hi Marine Khan of the time just to go back to food prices.

I'm interested to know why or how the bank seems to have been a little surprised by this story given that you have a network of agents. that their agents are not asking the right questions or even that companies are not answering honestly about their pricing behavior and, since in some ways we cannot foresee what was going to happen with food prices and, to some extent point, the products, why are you so confident? that even though they will go down, as you said a little bit slowly, actually maybe companies are answering honestly about their future behavior, so that's another good question.

I mean, I think the problem is the degree of persistence of food inflation that we've had. seen, I mean, you can say you can go back to the underlying shocks, but that's a question of how you interpret the impact, particularly of what's happening in Ukraine. I'm afraid you might remember about a year ago. I said, you know, something that was played quite dramatically, right? You know, it wasn't really in that sense, but more to make it clear that food is a big problem in the shock that we're seeing now, the question so. was how long this broadcast was going to last and was it going to continue longer as it turned out that it seems to have gone on longer than certainly some sort of past experience would illustrate that and I will. pulling a tooth, I mean, I mentioned it a few minutes ago, but I'll ruin it real quick.

I think there is an element of impact, particularly of energy costs in food production, which I think probably is, but we don't achieve as much. I should have. I think it s true. I think the hardest thing to judge, as I mentioned before, is how and by the way. I have to say one of the things that I find, you know, that our agents find when I travel around the country. Of course, the question of energy we talk a lot about the question of energy for homes, but it is also important to talk about it for companies and the question of energy for companies is very complicated because you really know that companies have contracts which run for periods of time and restart largely depending on when they restart and there's no set time at which commercial energy contracts are selected, so you know companies are having very different experiences.

I mean, I talk to a lot of companies, their experiences are very different because it just depends on when you restart your contractors to know what their experience is and that can happen in very different ways in terms of impact on pricing, but I think the other thing What I would mention is this question about hedging, meaning how much hedging was done and over what period of time and how the hedging behavior responded to the severity of the shock and I think yes, I think there is a lot of uncertainty and there are things that we learned. about this, so you know.

I think it's true, I'm sorry, yeah, just a couple of things in it there's a good couple ofgraphics. Look, all the graphics are good, but particularly good is the middle of report 50, page 57 and eight, a couple of things about performance, really good, one at 58. Andrew already showed you in the introduction that the fact that The inflation of food prices being so high is not only due to quotes, the pricing strategies of companies. Mosander indicated that their costs have increased enormously and the minimum wage has risen. Energy prices have a lot of energy use in food production and we don't just rely on what food retailers tell us about what they're going to do because we know that what they do is going to be driven by these other things to some extent, so if you search this is for Energy X products a the left, so that's more than just food on the left side of 28 to Chart 2.18, you know, we know we can see it here, there's pretty strong evidence on the producer price side that we think the price of retail goods It's inflation.

The price of retail goods will slow and their inflation rate will fall and you can see how close that correlation is for food production. Producer price inflation hasn't dropped that much, but it appears to be peaking. You see the same thing in other countries if you look at input prices for food producers, that inflation rate has been falling for several months, so we don't just listen to what retailers tell us, who reconstruct the forecast a little more carefully and I must emphasize that, although we have definitely endured food price inflation for a while until we get to the significant part of the forecast for us, something we call a policy horizon, the point at which current changes in monetary policy would actually have an impact on inflation, i.e. 18 months and two years. and beyond the fact that it is not having an impact, we still think, based partly on this and partly on what we are seeing in underlying commodity prices, that food price inflation will come down significantly, it will just take a little bit longer than we thought three months ago, I mean, just add something, I mean, now it's getting very specific, if you don't want to say it, the price level of milk has gone down, in fact, that's the level really clear in the last few months, but just give me, I mean, I don't live my life in bakeries, but I was tonight.

I've gone. I've been to several bakeries around the country recently. I know you might think he would even look at me. um and what they said is that it's pretty interesting. I mean their The response in terms of purchasing basic products to cover themselves changed a little bit in response to seeing the nature of the impact they suffered. There's a war in one of the largest grain-producing countries in the world. You know they take that into account and I think those judgments, yeah, yeah, I mean, you know we have to learn about those judgments as we go, let's go to jamana and Larry, hello jamana.

CNBC's Versace took note of his comments on national inflation. Pressures, can you hear me? Let me go again. Can you hear me now? Always better. OK OK. I took note of your comments regarding domestic inflationary pressures. Private sector wage growth is above seven percentage points to align with its price stability mandate. many economists say it should be closer to three percentage points, how are you going to reduce that number without causing a recession or a massive increase in unemployment rates? Very good question, we already think it's going down a little bit and Andrew Shady demands With some of the indicators, what's very unusual about this is that it's not just economic inactivity or the unemployment rate that has driven wage growth. , but they are largely the second round effects of these huge Rogers and the import prices that I gave you before for This enormous cost of living is a pressure that we have had for the country as a whole and that is why we have all experienced this and we think the result of that big hit to real incomes is that for Kauai there are understandable reasons for businesses and house

holds

to try to protect those real incomes. by raising their nominal prices and wages in a respectable way now collectively, unfortunately that doesn't really solve the problem because it is simply a problem that is posed to us collectively from the outside, but this is the reason why we believe that those predominant reasons why wages have accelerated and domestic prices have accelerated, for example, and services, what we have seen now is the size of David and Andrew emphasized before, is that many of those global prices are declining, there is a breakdown somewhere in our wage forecast and we expect that for that reason it will predominantly be independent of the rate of Andrew discussed the bias that represents a judgment that this unfolding of second round effects will actually take longer than the models tell us. .

To say yes, tradition unravels quite quickly and there will be a considerable drop in wage growth and domestic pricing without harana, but we have been more cautious than that and unemployment actually rises less in the forecast than in February, but the highs are skyrocketing, but I think you have to understand it, but these very unusual circumstances and what has driven these growth rates to begin with is partly the tight labor market, but mostly other things, and those other things are falling apart, Larry. Elliott from the Guardian um, interest rates have gone up 12 times in a row, inflation as you say is still too high above 10 per cent, by any stretch of the imagination, that strikes me as a political failure at some point instead of blaming Vladimir.

Putin for this or the wage negotiators trying to negotiate wage increases for their workers, isn't it time for the bank to acknowledge its part in the failure of this policy and apologize to the heads of households who are paying? their mortgages I'm sorry for small businesses facing much higher overdrafts, isn't it time the bank said sorry, did we make a mistake? Well, Larry, we don't use the language of blame. We must be clear on this. I mean, and I do. read articles that are phrased in those terms and I don't use the language of blaming. What I do think we need to do is expose the underlying shocks that are happening to the global economy and to the UK economy. that in a certain sense can cause this situation and we reject it.

Ben gave a speech about this a couple of weeks ago about some of the arguments that the underlying cause has nothing to do with these other things it has to do with the way association policy has been set up in the past, but I want to distinguish two things here, so that's the first point I'll make. I think it is important to expose the causes, but not in the language of blame that we are not using. blame language um, if you want to argue that the war in Ukraine has not caused inflation, I think we would be happy to have that debate with you, but we don't agree with you, I'm afraid now I think the second approach to this question is : Sometimes I think it's more important, which is fine, yes, let's take those kinds of causes and then say: did you, as the Bank of England, respond quickly enough or strongly enough to those causes?

Could you have anticipated those causes and therefore compensated for the experiences now? I think it's a debate that we have had for some time and I think you're happy to have it again, so to speak. I would like to point out that you know, as I've said many times before, that there is a level of what I know, if you don't mind, that I say in retrospect on many of these trials, the other thing I would say is that I think Ben has proposed and certainly Sylvana Turner has featured in speeches they have given in the past. and if you take Ukraine as a good case, you have to make two assumptions: one is that we could have foreseen the war far enough in advance to have taken steps to compensate for it, so that's, I mean, don't go beyond that point , but I'll lay out the second one just for the sake of argument, if you don't mind, and then I would have taken massive compensatory action, uh, in the middle of the covid recession, uh, to compensate for it now.

I could debate that second point, but I'm actually afraid I'm not even getting to that point because the idea that we could have foreseen the Ukraine war, you know, 18 months or two years before it happened, I'm afraid that's the case. a stretch beyond which I wouldn't go, but that's not the language of blame, Larry, I don't want to use that language, I think we should have a debate about, you know, how politics responds, but I think it's important that we lay out here the underlying causes, thanks Chris Giles of the Financial Times. I'm not going to use the language of blame or the language of hindsight, just the assessment, um, the NPC says there's about a 50% chance that inflation will increase. be above your target through 2026, that would be five years above target inflation 50 50 chances of that being a good performance, how would you evaluate the performance?

It's something I'd be proud of, as you can see from the shape we're obviously in. We've set up the presentation, of course, mind you, we always present the fan box so you can always do that, you know, both in the bad case, so let's stick with the bad case for the moment, which is the one where you know where we are. I've put in more persistence than the model suggests and that really ties into what Ben was just saying about asymmetry: it gets inflation back on target towards the end of next year, now you know, of course, there's a debate about what so quickly We should get inflation back on target and how appropriate different settings are, you know, and we have to balance that because, yeah, we also have language, you know, in our targets about offsets, um, and we're going to go .

As you consider it, you know very carefully as we find ourselves what the right path is to reduce inflation, but I think that, you know, this path that we have is not unreasonable given the scale of the shock that we've had. to take into account that the large scale of the take that we've had and I think we have to consider, yes, you could consider paths that would be faster because, after all, keep in mind that you've cited, you know you've cited one side of the fan diagram, you can cite the other side as well, um, but I think you know what we have is an appropriate path and I'll go back to the point I made to Phil's question, which is, uh, we.

Obviously, we will be guided by the evidence at each meeting and consider it appropriately, but there is no bias at this time in our rate setting. I'm looking forward to Dave and just to use the framework that you use Chris. I think any assessment would be, We have to take into account the fact that we've been in the global economy and we've been hit by two shocks, you know, once a century, in rapid succession, again, without using the language of blame. , simply recognizing the world that we and other central banks find ourselves in. So we have a pandemic, so we have a major pandemic, certainly once in a century, the first major war in Europe since World War II and these have had very significant impacts on prices and pricing and if you look back , in the history, you know, we started raising rates in December 2021, when Omicron was, we were still trying to make sense of the Omicron variant when I say, I mean the country as a whole.

I remember there was a lot of surprise at the time that rates had gone up in that health context and then, as I've described the shocks that we've had since then from the terrible war in Ukraine, which are still unfolding and are unfolding in different ways. ways for different sectors, so I have discussed a lot today, and rightly so, about what happened with food prices, but also, and you know, that originates with the war in Ukraine in terms of the shocks arising from that, but there are also other shocks that have affected food prices and us like us.

Monetary policy makers have to deal with that world and I think an assessment of us and other central banks because I mean we started tightening policy before other central banks, particularly before the Federal Reserve and the ECB to taking into account the situation that we find ourselves in during this period, which has just been an extraordinary period for the world economy, for the UK economy and for monetary policy, the tape in charge shows this probability, is your probability of be below no no but you said no and we understand that it is not late 26 presidents. I think someone told me the first and second quarter of 25 to be clear and then it's below two percent, of course not, but of course not, that's not what I said, I just want to. to be precise about the premise of the questions, the points Chris that I think we're all making is the debate that we're very happy to have is what's the best way to refer to, yes, going back to theprice stability given the Shocks we've had and yes, Dave put it very well, these are two big events in history.

David stayed, so David Millican of Reuters. I know that in the military policy report there is a little bit of talk about the delayed effect. obviously it's hard to judge this, things have changed quite a bit since the Bank of England's last tightening cycle. I was wondering how sure you can be that you're not in some way overtightening because obviously there are two members of the monetary policy committee who for several months have been voting against some sort of rate hike, so that, how brief can it be that it is not kind? to overstep here, well, it's a very good question because during this round we have spent, I think appropriately, a lot of time on what we call a transmission mechanism and how it has changed.

Now you know, I showed the mortgage market graph very deliberately. because I think that's probably the most interesting area of ​​the transmission mechanism because it's changed a lot over time. We now have in the UK a predominantly fixed rate mortgage market, not fixed rate as the US has obviously done, but it is still a fixed rate for a period of time. I think about 85 percent of the mortgage stock in this country is now fixed rate, whereas if you go back, I deliberately showed the long-term version of that graph to bring you back to a point. when that wasn't the case and as that child demonstrated, I mean, yes, we still have a ways to go in that world, more than we would have had in the past at this point, and so, yes.

I mean, two things that are a very lively topic of debate in the committee, we have, however, we do take into account what we think is the step now, so everything is taken into account in our evaluation, but yes, for Of course, there's still because we haven't seen this kind of thing happen before, we haven't had an adjustment cycle with this mortgage market. There's a lot of debate around that and I'm sure you know there's a lot of, there has to be a lot of judgment. in that debate um hello oh not very good um oh thank you thank you very much um yes devil Jordan from the BBC um I wonder what you say to people who are struggling to make ends meet um do they do it with people like the pill Hugh ?

I suggested that we should accept that they are poorer. I'm very, very dark and we are very aware that you know that this inflation all inflation is difficult and particularly for the less fortunate this inflation is particularly difficult for the less fortunate because it is concentrated. As we have discussed today in what is called the essential elements of life, food and energy, and people with lower incomes have a higher proportion of their consumption, the essential elements of life, food and energy, are obviously the elements most importantly, very, very aware of that. At this point, we face the difficult situation that, as Ben has said, you know, there has been a very substantial impact on national income caused by these external shocks that take the national real income, which takes the form of higher inflation that is happening and we have To deal with that now, you mentioned what you said, let me be very clear on this, yes, the economics of the impact on national income is clear, but I think it's very, I want to be very clear that we are very sensitive to the position of people. particularly for all people, but particularly for people with lower incomes.

I don't think there is a great variety of words. It was the right one. In that sense I have to be honest and I think he would agree with me, but what I'm afraid we cannot avoid is this huge blow to the national income that we have to deal with and we have to yes, We have to deal with that and, of course, as we have said a lot, we have to deal with the risk that that will lead to second-round domestic inflation effects. Can I just not? I just wanted to say in that regard something that I think is important to emphasize that because, as I said before, some of these global prices, many of them have stopped increasing and, in fact, some are related to the pandemic shortages, so example, but the most obvious thing is that energy prices have actually been falling, there is some relief here and you can see it in this forecast.

I don't want to emphasize this too much because the levels are still at these prices are still much higher than before and we will continue that in this forecast, but in terms of the growth rate there is a little bit of relief. So if you look at real labor income, for example, in this forecast in the year to the fourth quarter of this year, throughout 2023, it is not projected to grow and it is projected to grow quite a bit by more than two and a half percent. percent, which will actually be the best annual growth rate we've had for about five years.

In the long term, that growth rate depends on improvements and productivity, etc., and it is not the case that these processes will go down forever, but that is starting to provide. A little relief and we are starting to see real income growth throughout this year. Thank you governor for your presentation. We now see inflation in the US at 4.9 in April. April 7 in the eurozone, just putting this in the international context, why not? What you believe is that UK inflation, at 10.1 per cent still in March, as you well know now, has not only been higher than in much of the advanced industrial world, but far from being transitory , has actually been particularly stubborn.

Can I make an observation? I think Ben wants to stand out. Let's go to another point, can I do a? I mean, it's kind of a mechanical point, but I think it's important to make it at this point. Because you're right to point out to Liam why inflation hasn't gone down. You know, faster in this country. It's a particular point about energy prices, uh, and the energy price that sets a mechanism in this country, actually has a lot to do with the fact that if we go back, we go back a year, actually, before that the agreements be changed.

The pricing mechanism worked was established every six months, that is important. The reason I say this is because that's why we have a very large base effect for the issue that will actually be the April issue that will be published in two months. and why actually those base effects have been released quite a bit faster in continental Europe or something like that. I mean, the economy was a bit of a mixed bag, obviously, but I just want to emphasize that it's an important point. In the current comparison, there was a small change. Actually, about a year ago, but that's a very important point in today's point of comparison.

Yes, I think that is actually the vast majority of the difference with Europe. If you look at core inflation rates in March, we are hot. in Europe 6.2 versus 5.7, but most of that, you know, what is actually an overall gap of 3.2 percentage points is this point on energy, so if you include the Petrol or national energy prices, national energy and petrol, remain 40 points higher in the UK. in March it was 40 higher than the previous year in Europe the numbers are negative in the United States it is -10 in the inflation rate for energy and a lot of that has to do with the way the gem limit is set The effect of these increases is still here for us, I mean, it will decrease, but it will decrease in a fairly predictable way because we can see exactly what will happen in the camp.

We know what happened a year before, but it will happen. it's going to take a little bit longer, so I probably don't want to reach the maximum gap, but that's the big difference in the energy process, so with the US, by the way, the difference is not just time, but also How I know they never saw the same increase in wholesale gasoline prices, to begin with Jack and then John Paul. Hi Jack Bonner from town. I'm trying to get back to the transmission mechanism that you mentioned there and obviously there's a part in today's report that says the way it's transmitted through the mortgage market has been mitigated because we now have a new shaved mortgage market.

If it matches the inflation forecast, it is saying that much of the decline is being driven by supply. parallel measures to make energy prices fall freely prices fall too Is there a question among the mnpc now that the real effectiveness of monetary policy in controlling inflation is how effective it is and whether it has been mitigated as a result of a change in some of the policies? the economic structure in the UK, well, I don't think type one will come to light. I wouldn't use the word blunted, I think we have to, yes, we have to adapt our view of the transmission mechanism to the markets that we have around us. we were and the mortgage market has changed and therefore we have to adapt our view of monetary policy transmission and of course that then feeds back into our decisions so rather than dulling I would say we know we have to yes , we understand that I have to adapt to what the transmission mechanism is, yes, I mean this cash flow effect that is driven by the nature of the mortgage market and the structure.

I would say it has slowed down rather than blunted relative to what will take time. but, as the chart that Andrew showed, we think the stock has only gained about 70 basis points of a total. If you look at the quoted rates, if you look at the quoted rates on the most popular products, you know it's at 300 basis points, so there's a long way to go, but that will add up, even though we've put all these charts and in the chart Today, this is not news to us, we knew that the mortgage market had changed and we have been factoring. in our forecasts for some time overall.

I mean, we'll continue to work on this, but overall we don't think the overall impact of the transmission mechanism is any less than what we think is basically the same, but and those. impacts on demand and they are coming, they will come through more Market, you will see that if you look at the summary table in the forecast, it shows that we move from a current excess demand position as slack builds up. We know that and other factors come into effect, we will move toward opening up excess capacity. We expect some increase, unfortunately, in unemployment, but we think that is necessary.

Only now there is an increase to four and a half percent, that is, less than the most. out of five, you know that the peak or final unemployment we had before, so those characteristics still play a role, but you are also right to emphasize the role that the supply side and supply shocks play throughout this period in which we talk constantly. because we believe that they are relevant to the inflation that we are experiencing and how pricing is developing, but the demand effects of what we are doing and what we have to do in terms of monetary policy, we are, we are still confident, I'll answer the last two questions, Sean Paul and then halia, thank you.

John Paul Ford Rochas from The Daily Mail I'm only partially following up on an earlier question. You said Hugh's pill language wasn't the right language. Maybe you agree. which was insensitive, as some people think, at the same time the head of the Stock Exchange is saying that executives should be paid more to attract them to London, which seems completely different from what you are saying and I have also said in the monastery policy report that the transfer of higher rates to savers is unusually weak, so I wonder if you think people in your position, city people, bank people, should lead by example , and you should set an example too.

Should you take pills? Should others at the Bank of England refuse to raise pay? I kind of say that's what I've done, so I mean, actually, okay, should people in town stop talking about higher salaries for executives? and should banks do more to pass on rate increases to savers, well just to be moderate, I certainly want to speak for myself. I haven't accepted a pay increase, so just to emphasize that point about the level of pay increases for executives I mean, obviously these things are set by companies, not us. I have been very clear as you know my past and in my presence as a bank regulator that we have quite extensive regulation that seeks to create the appropriate incentives for the remuneration of senior executives, but it is not about the level, it is about the so I have very clear on this point, it is the companies who must establish that in their point on deposits, I think, and we go into this quite a bit in the report.

In fact, it is true that the rate of transfer to the site's deposits has attenuated. I think we use that word. We actually muted the pass-through rate of our interest rate. The increases in time deposits and fixed rate deposits have actually been much faster and is not very different from thereal increases that have occurred in the official rate now. I'm not in any way surprised by that because, let me put my banking regulator and financial stability hat back on since then. The global financial crisis has changed the liquidity regime in a way that greatly incentivizes banks that hold term deposits, they don't have time now, but if you go back to the recent experience of Silicon Valley Bank and so on, you will probably understand why I mean that en What we have seen is interesting but not surprising.

I think this is sensible because it appears that there has been a flow from site deposits into term deposits and that is exactly what would be expected given the price differential and What I mean is that I think it is important for people to compare prices and that we have competition in the banking system. I mean, those pricing mechanisms should come into effect in that sense. Yes, Ibrahimi, Channel 4 News Governor, you talked about the changing mortgage market. But are you worried about those people who are canceling their fixed-term mortgages? There are millions of them and for them the impact of these 12 rate increases is surprising and very difficult.

Well, let me repeat what I said before because it is very important that we are very aware of the effect that this inflation is having and the consequences that this inflation is having on households, so please do not believe that when we are not , in no sense are we now. I think it's important that, obviously, I know that they are very aware of what these effects are and, as Dave was saying, we would take them into account, that's important. The other thing I would say is, something we've done again, I'll build on the financial stability side. to the bank for a moment, again you know, for a decade now, not long ago, we have implemented policies to limit the proportion of mortgages that are at the most extreme end of loan type to income. relationship now that, to be clear, it was done as a matter of financial stability, it was not a social policy intervention because that's not for us, but I would say one thing that I think will help is that that obviously limits some of the more extreme impacts that we have had in the past, again this has nothing to do with the Bank of England.

We have much stronger protections now, yes, which means there will be people who will not have their homes. embargoed the way they used to be embargoed again, you know, my old uh, my old team at the FCA has been very active in that field and I think that's appropriate, but you know, let me go back to the first one. Points I made, you're right, of course, these things have serious impacts and are very sensitive to this, but if we don't address inflation, it will be worse for people, that's the bottom line. I'm afraid thank you all very much.

Very patient, thank you for answering my question. Lucy Harga m. Market news just wanted to ask. Given recent volatility and projections, can financial markets continue to rely on the Bank of England's long-term projections as a reliable communication tool? Well, we spent a lot of time. and we have a lot of staff that spend a lot of time evaluating volatility and financial markets to help us read it and I mean you're right it's interesting now it's interesting in the period before you know since we lost. The last NPC meeting said we've obviously had quite a bit of volatility in the financial markets because obviously we've had some very, very high profile events in the Global Financial System and in the Global Financial System.

Seriously, what we've done in the UK has been a bit of a round trip and we ended up not too far from where we started, which made the NPC's task a little easier in this case at times, but no look, we have to spend a lot of time interpreting this because of understanding. you already know the underlying reasons and the likely type of follow-up of these things and how persistent they will be. Ben seems lucky, yes, a couple of points about the nature of our forecast. I mean, first, I don't think they are intended to communicate anything about future policy.

Historically, its goal is rather to explain the current decision due to these long delays in policy. We have to make forecasts. Sometimes I wish I didn't, but we have to calculate the full costs and we use them. to explain the current decision insteadInstead of saying this is what we are going to do for the next two or three years, the second thing I will say from the beginning is that this was always considered very important and continues to be very important, they are doing tests of fans, their probability distributions, they are not point estimates, they are not point forecasts and that needs to be understood and then the third thing is something that we said before is that they are conditional and outside people can have different conditions and that's fine, there are many people who make forecasts.

I don't think people think that it's okay, well, I'm going to just rely on the Bank of England, which makes a particular type of forecast, in fact, a whole range of numbers within the range, so I'm not sure that Let's see it as a kind of communication device about what will happen in the future and even less about what will happen with interest rates.