Bank of England Governor's Remarks Today At Release of Feb.2015 Inflation Report

Excerpts from his introductory remarks:

"Inflation is at its lowest level since the introduction of Inflation Targeting two decades ago.

It will likely fall further, potentially turn negative in the spring, and be close to zero for the remainder of the year.

Growth in the global economy was a touch stronger last year than we had expected in November. And the outlook for the UK’s trading partners is virtually unchanged since our last forecast. Despite renewed headwinds from geopolitics and deleveraging, modest global growth is expected to continue, reflecting three factors.

First, oil prices have halved since six months ago. As these falls are more likely to reflect changes to the actual and potential supply of crude than reductions in demand for it, this development is unambiguously positive for the global economy.

Second, central banks around the world have provided additional stimulus. Most notably, recent ECB actions should provide much needed support to activity in our largest trading partner.

Third, partly as a consequence, global real interest rates have fallen further. And, notwithstanding increases in market volatility, financial conditions have improved on balance. In the United Kingdom, output growth remains solid and domestic demand growth robust. Unemployment has continued to fall, reaching its lowest level for more than six years, with half a million new jobs created in the past year. The margin of slack in the economy has narrowed further as expected. And as the labour market has tightened, growth rates of wages and unit labour costs are beginning to pick up.  

The combination of rising wages and falling energy and food prices will help household finances and boost the growth of real take home pay this year to its fastest rate in a decade. This will support solid growth in consumer spending. As demonstrated by the recent Bank of England stress tests, the core of our financial system is increasingly resilient and functioning well. Access to credit continues to improve and many borrowing rates are at or near historical lows. Against that backdrop, surveys point to robust investment growth."

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