Clare Lombardelli: Managing the present, shaping the future

Speech by Ms Clare Lombardelli, Deputy Governor for Monetary Policy of the Bank of England, at the Bank of England Watchers Conference, organised by King's Business School and the Money, Macro and Finance Society, London, 25 November 2024.

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

Good morning. Thank you for inviting me. It's a pleasure to speak at the Bank of England Watchers Conference, in front of many of our key stakeholders. This is my first speech as Deputy Governor for Monetary Policy. So I'll start by setting out my view on the economy and the outlook – how I am "managing the present". I'll then move on to talk about the Monetary Policy Transformation Programme we are undertaking in response to Dr Bernanke's review – how we are "shaping the future". This is a big reform programme. We are going to handle uncertainty differently, putting different scenarios - different stories about the economy - closer to the heart of policymaking and communications. To do that, we are making a major investment in our tools, our processes and our people. We have made some progress since the review was published in April, but have a long way to go. We want to engage with you on this journey. I will come back to the details shortly.

The evolution of the UK economy

Inflation has fallen steeply over the past two years, from its peak of 11.1% in October 2022 to 2.3% in October 2024. This mainly reflects the ongoing unwind of the very large external cost shocks that hit the UK in 2021 and 2022 and that made UK inflation rise steeply in the first place. As you can see in Chart 1, the key driver of the increase in inflation was the rise in goods prices. This was a result of the global supply constraints that arose during the pandemic, and the large rise in energy and then food prices associated with the Russian invasion of Ukraine. In turn, higher energy prices pushed up goods prices further.