BOE Is Focused on Productivity Growth, Bailey Says

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00:00The first point I would make, insofar as potential growth is determined by, you know, productivity and labor supply,

00:07we're putting a lot more emphasis on productivity growth really going forwards,

00:10and that is the thing that fell off in the post-2008 period, certainly, I mean, in all countries other than the U.S.

00:16And of course, even in the U.S. it's very focused on the tech sector.

00:19If you look at the U.S. absent the tech sector, it looks much like the rest of us in many ways.

00:24So going forwards in terms of, you know, what raises this potential growth rate, it really is productivity.

00:31You know, we've got to look at productivity growth, and I think we have to say, what's the next likely general purpose technology innovation?

00:40Well, it's related to AI, it seems to me.

00:42Now, you know, I think we've got to do it sort of, you know, with our eyes open, we've got to do it sensibly,

00:47but this is a critical question.

00:49In the short run for the U.K. economy, you know, we've been seeing growth probably a little bit under potential.

00:57I do, and we had some numbers out this morning.

00:59You know, I've been saying for some time that I think we're seeing some softening of the labor market.

01:04I've spent the last two or three weeks going on tours around the country,

01:08which I have to say is the most fun part of my job.

01:14And that broadly is the story that I pick up.

01:17I think we saw it in the numbers this morning.

01:19On the other hand, you know, balancing that off, we've got inflation above target.

01:24Most of the reason for that is not generated by the underlying state of the balance of supply and demand in the economy,

01:30but it is inflation nonetheless.

01:32So balancing these two things is the thing that we're having to do.

01:37And I think the numbers we've seen, you know, just really broadly underline that story.