The slump in overall productivity last year (and the ongoing weakness in public sector productivity) suggests that at least some of the weakness in activity is probably due to lower supply as well as weaker demand. That could support the rise in CPI inflation this year that already seems baked in the cake. But we continue to think weak demand will dominate and a slowdown in wage growth will allow the Bank of England to cut interest rates further than what is priced into the market.
We’ll be discussing the outlook for Bank of England, Fed and ECB policy in a 20-minute online Drop-In at 3pm GMT on Thursday 20th March. (Register here.)
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