Overview 5
1 Money and asset prices 9
1.1 Financial markets and asset prices 9
1.2 Credit conditions 13
1.3 Monetary aggregates 18
Box Monetary policy since the February Report 10
Box How far along the risk spectrum has secured credit supply tightened
for households? 16
2 Demand 19
2.1 Domestic demand 19
2.2 External demand and net trade 24
Box The implications of recent falls in consumer confidence for spending 22
3 Output and supply 27
3.1 Output 27
3.2 Capacity pressures and capital 29
3.3 Pressures within the labour market 30
Box The impact of the dislocation in financial markets on potential supply 28
4 Costs and prices 33
4.1 Near-term outlook for CPI inflation 33
4.2 Global costs and prices 34
4.3 Inflation expectations 36
4.4 Labour costs 36
4.5 Companies’ pricing decisions 37
5 Prospects for inflation 39
5.1 The projections for demand and inflation 39
5.2 Risks to demand 41
5.3 Risks to inflation 44
5.4 The balance of risks 47
5.5 The policy decision 47
Box Financial and energy market assumptions 40
Box Other forecasters’ expectations 49
Index of charts and tables 50
Press Notices 52
Glossary and other information 53
Contents