BOE's Bailey Says UK Growth Must Be Prioritized

Summary

Bank of England Governor Andrew Bailey delivered a speech at the Mansion House dinner, stressing that UK economic growth has been chronically weak for over 15 years due to a series of supply shocks and a sharp slowdown in productivity. He emphasized that reversing this trend and raising the UK's growth potential is a national priority. He also noted that while underlying inflation is moderating, recent geopolitical tensions mean inflation will take longer to return to target.

• Bailey highlights UK's prolonged period of weak growth relative to pre-crisis standards.
• Potential growth rate has roughly halved from above 2.5% to slightly above 1.25% since the financial crisis.
• Lower productivity growth is the main cause, depressing incomes and living standards.
• He says reversing the productivity slowdown must be a national priority.
• Inflation is still expected to return to target but will take longer due to Middle East uncertainty.
• Underlying inflationary pressures are moderating despite recent energy price volatility.
• The speech shifts focus from cyclical monetary policy to long-term supply-side challenges.