Mark Carney: The growing challenges for monetary policy in the current international monetary and financial system

Speech by Mr Mark Carney, Governor of the Bank of England, at "Challenges for Monetary Policy", a symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming, 23 August 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

Before turning to the focus of my remarks, I would like to begin with a few comments on the UK outlook.

A snapshot suggests the UK economy is currently close to equilibrium, operating just below potential with inflation just above its target.

Both headline and core inflation are around 2%, and domestic price pressures have been picking up notably. In particular, the labour market is tight. Growth in wages and unit wage costs have strengthened considerably as slack has been absorbed, with both now running at their highest rates in over a decade. The strength of the labour market is supporting consumer spending, which is rising broadly in line with real incomes.

But pictures can deceive; two large, volatile forces could push the UK economy far from balance.