1. Role of the Bank & the economic outlook Glynn Jones Agency for the West Midlands & Oxfordshire NAVA Conference – 25 September 2014

2. West Midlands & Oxfordshire Agency The FPC You aren't signed in Sign In Help

3. West Midlands & Oxfordshire Agency House prices continue to rise

4. West Midlands & Oxfordshire Agency The share of new mortgages with LTI multiples above 4.5 has risen to a new peak New mortgages advanced for house purchase by LTI

5. Overview

6. West Midlands & Oxfordshire Agency GDP – output by sector

7. West Midlands & Oxfordshire Agency Growth and inflation outlook little changed from May GDPCPI Based on market interest rate expectations and £375 billion purchased assets

8. West Midlands & Oxfordshire Agency But unemployment has fallen far more quickly than expected

9. West Midlands & Oxfordshire Agency The MPC expects gradual and limited rate increases A view broadly shared by markets

10. West Midlands & Oxfordshire Agency Bank Rate likely to remain below pre-crisis average for some time Due to higher credit spreads and global factors Credit spreadsGlobal long-term real interest rates

11. Demand

12. West Midlands & Oxfordshire Agency -15 -10 -5 0 5 10 15 20 20052007200920112013 USJapanEuro areaChinaIndia Global annual GDP growth moderating %

13. West Midlands & Oxfordshire Agency Household consumption growth has been outpacing income growth

14. West Midlands & Oxfordshire Agency Housing market activity has fallen back a little

15. West Midlands & Oxfordshire Agency Surveys point to continued strong growth in business investment

16. West Midlands & Oxfordshire Agency More fiscal consolidation to come

17. Supply

18. West Midlands & Oxfordshire Agency Unemployment rate falling so slack reducing…

19. West Midlands & Oxfordshire Agency …but wage and productivity growth are weak – suggesting more slack than expected Private sector nominal earnings and output per worker

20. West Midlands & Oxfordshire Agency Participation much stronger than expected

21. West Midlands & Oxfordshire Agency Productivity puzzle intact: partially explained by mis-measurement and the financial crisis

22. West Midlands & Oxfordshire Agency Benign inflation environment

23. West Midlands & Oxfordshire Agency Summary - August projections (a) GDPCPI (a) based on market interest rate expectations and £375 billion purchased assets

24. Inflation Report – August 2014 www.bankofengland.co.uk/publications/inflationreport/index.htm

25. West Midlands & Oxfordshire Agency Table 1 Averages of other forecasters’ central projections (a) Source: Projections of outside forecasters as of 28 July 2014.

26. West Midlands & Oxfordshire Agency Chart A Inflation has fallen more quickly than expected

27. West Midlands & Oxfordshire Agency Chart B GDP growth has been stronger than expected

28. West Midlands & Oxfordshire Agency Labour costs and recruitment difficulties Labour costs Recruitment difficulties Settlements up modestly on last year –Fewer pay freezes –NMW pressure after October –Recruitment and retention pressures rising Other pay elements picking up –Performance better than expected, boosting variable pay –But change in composition or work forces pushing other way –Auto Enrolment will increase costs for small firms

29. West Midlands & Oxfordshire Agency Labour market – leading indicators Vacancies Salaries of new recruits Sources: Bank of England, BCC, Income Data Services, KPMG/REC/Markit, the Labour Research Department, ONS and XpertHR.