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MNI POLICY: BOE Eyes UK Trend Growth As Labour Force Tightens

(MNI) London

The Bank of England's Feb Monetary Policy Report is set to revisit the trend rate of growth, with a risk it could be lowered further.

A stagnating UK workforce and a likely higher equilibrium rate of unemployment have raised the chances that the Bank of England will ratchet its already-low estimate for trend economic growth still lower when it produces its annual supply-side stock take in its February Monetary Policy Report.

The BOE last assessed potential supply growth in November 2021 as around 1.5%, but the the labour force seems to have moved away from a prolonged period of growth prior to the Covid pandemic. Private sector economists have already adjusted their estimates of how quickly the economy can grow without driving inflationary pressures, with Allan Monks at JP Morgan saying the rate may have slipped below 1%.

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A stagnating UK workforce and a likely higher equilibrium rate of unemployment have raised the chances that the Bank of England will ratchet its already-low estimate for trend economic growth still lower when it produces its annual supply-side stock take in its February Monetary Policy Report.

The BOE last assessed potential supply growth in November 2021 as around 1.5%, but the the labour force seems to have moved away from a prolonged period of growth prior to the Covid pandemic. Private sector economists have already adjusted their estimates of how quickly the economy can grow without driving inflationary pressures, with Allan Monks at JP Morgan saying the rate may have slipped below 1%.

Keep reading...Show less