Monetary and financial
stability and the invasion of
Ukraine - speech by Jon
Cunliffe
Given at European Economics & Financial Centre
04 April 2022
Speech
Over the past 2 years, the UK has seen three economic and financial shocks: the final
stage of Brexit, the Covid pandemic and most recently, the Russian invasion of Ukraine,
which the Bank of England has made clear it condemns.1
I want to talk today about the impact on the UK economy and on UK financial stability of
the last of these. We do not of course know the outcome of Russia's aggression in
Ukraine; there are many courses the conflict could take. And it may be many years before
we know whether this will be a structural, long lasting change in what is now essentially an
integrated global economy. But I think it is possible now to see at least some of the
channels through which it is affecting the UK and broadly, the scale and direction of the
impacts in the near term.
Starting points matter. The UK economy entered 2022 still affected by two major impacts
-
of the path out of Covid very high imported inflation, and a very tight labour market with
strong pay growth.
Imported UK inflation
Imported inflation has been the primary driver of the sharp increases in inflation we have
seen in the UK, reflected in both goods and energy (chart 1).2 Goods prices have risen
because of supply side frictions3 generated by the rapid reopening of much of the global
economy, the rotation of demand from services to goods, and because of the fact that,
once past the initial phase of the pandemic, demand in advanced economies was strong
-
relative to economic activity primarily as a result of policy support. For example, chart 2
shows that UK household incomes did not fall as much as GDP.
The initial phase of the pandemic was disinflationary. But as economies recovered in fits
and starts over the course of last year, supply, itself damaged by the pandemic, could not
keep pace with demand. This has been the underlying driver of global goods prices and,
until the prospect grew of a Russian invasion of Ukraine, of the rise in global energy
prices. Over half of the shortfall in European gas storage in 2021 was accounted for by
higher LNG demand in Asia.4
UK goods prices, including food and energy, are now considerably above their pre-Covid
trend and inflation is high (chart 3). Services prices, which better reflect domestic costs5,
have still to regain their pre-Covid trend. Services inflation has risen but is currently at
3.5%, which is only slightly above its long-run average.
The UK labour market
The domestic labour market has also been buffeted by large changes in supply and
demand as we have emerged from the pandemic.
Labour supply has been hit by a drop in participation in the labour force and lower net
migration. There has been little recovery of participation in the UK, in spite of the recovery
in economic activity and employment (chart 4). It is still around 1% (around 350,000
people) below its pre-Covid level. It is possible that some of this weakness will prove to be
structural rather than cyclical, the result of changes in work and life preferences as a result
of the pandemic.
Lower participation has been compounded by lower migration either as a result of the
pandemic or Brexit. It is difficult to be precise about the impact of either or how temporary
the effect will prove to be. Migration data over the past two years are unreliable given the
disruption of the pandemic.6 But we can probably get an indication of the scale and
direction of travel from experimental statistics, which suggest that net migration to the UK
fell to around 35,000 in 2020, compared to more than 250,000 in 2019.7
On the demand side there is evidence that the pandemic increased the demand for labour
in some sectors, particularly health. The number of employees on payrolls is now some
700,000 higher than before Covid, half of which are in health, social work, education or
public administration.8 Some of this reflects a shift away from self-employment. But some
of this demand might be expected to wane as we move away from the pandemic. Indeed,
the number of workforce jobs in health and social work began to decline in the final quarter
of 2021.
Interestingly, and perhaps because of policy support, the pandemic and associated
economic impacts have not led to some of the scarring impacts that were forecast at the
outset. Unemployment, including longer term unemployment, is low. Although vacancies
have reached a record level, hiring has also been happening at a faster pace. There is no
material evidence of sectoral mismatches in the labour market, which has remained highly
flexible.9
Rather, what we have seen in the labour market coming out of Covid has very much been
a story of weak labour supply and strong labour demand. But the effect has been powerful:
the UK began the year with employment still below its pre-Covid level and GDP just above
but with a record 1.3 million vacancies and an increasingly tight labour market.
This has been reflected in pay, which has been growing faster than pre pandemic rates
since the final quarter of 2020. In the three months to January 2022 whole economy total
-
pay grew at 4.8%, with private sector regular pay perhaps a better measure of labour
- Our Agents' survey suggests that
market strength growing at over 4%. the majority of
firms are likely to pass at least some of these increases into prices over the coming year,
which will add to inflationary pressure.10
The Monetary Policy Committee's February forecast
(hereafter
The Monetary Policy Committee 'MPC') forecast in February 2022, which was
conditioned on market interest rates at the time, was characterised by the two
-
consequences of the pandemic that I have discussed high imported inflation and a very
tight labour market. Inflation was forecast to peak at over 7% in the second quarter of the
year, driven principally but not exclusively by a gas and electricity price increase of around
MPC's policy decision in February.11
50% that was confirmed on the same day as the
The resulting squeeze on household incomes later this year and into next year was
forecast at around a 2% reduction in disposable income. To put that into context, it would
be the biggest annual average reduction in household incomes for around three decades
and would return the total to late-2018 levels.
The impact of higher energy prices will not be felt evenly. Energy spending accounted for
around 6% of disposable income for the average UK household before Covid. For those in
the bottom 10% of the income distribution it was more than double that (chart 5). These
households have the lowest saving rates and tend to have lower stocks of savings to draw
on than those with higher incomes, which limits their ability to smooth consumption.12 So
these households tend to cut consumption more than higher income households for a
given fall in income.13 These factors could amplify the hit to aggregate demand.
As a consequence of this hit to demand, growth in economic activity was forecast to fall
back materially, in the second half of this year.
The rate of inflation was forecast to begin to fall back later this year and next as the
increase in energy prices dropped out of the annual inflation rate and the disinflationary
impact of the drop in demand took hold. Inflation ended the forecast well below target.
At the same time the labour market was forecast to remain tight in the near term with
unemployment continuing to fall until the middle of this year and pay continuing to grow
above 4% annually until the autumn, before the effect of the income squeeze on activity
and employment kicked in to offset the pressure in the labour market.
The impact of Russia's invasion of Ukraine
How then are the Russian invasion of Ukraine and the consequent economic sanctions
likely to change the picture in the MPC's February forecast?
Much will depend on the course of the conflict and the evolution of sanctions. But in all
probability, it will intensify and prolong the surge in inflation and tighten the squeeze on
household incomes. The consequent drop in demand through household consumption and
business investment will, to an extent not yet clear, be greater than we thought in
February. And there are also likely to be additional impacts on the supply side of the
economy.
The impact, as we have seen over the past few months, will come primarily through
commodity prices. The Russian economy itself is only a small part, around 3%, of the
global economy. For UK trade, it accounts for less than 1% of the world market.14 The
and Ukraine's
Ukrainian economy is smaller still. Russia financial links with the UK are
relatively small.
But Russia accounts for a much larger share of global commodity supply. This is most
-
apparent in energy oil, gas and coal. It is true also for industrial metals, fertilisers and
agricultural commodities. Ukraine is also a major supplier of the latter.
We have already started to see some of the effects on commodity prices, including for
energy and food. Global oil prices have increased by 11% and UK wholesale gas prices
have increased by 40% since the invasion (charts 6 and 7).15 These prices have been
extremely volatile, reflecting uncertainty about the course of the war and imposition of
sanctions (chart 8).16 Had I given this speech at the start of the last MPC round, the
increases would have been 22% and 116% respectively. Had I given it two weeks later,
when the decision was announced, they would have been 10% and 17%.
Volatile or not, however, UK wholesale gas prices have been around 40% higher on
into the next setting of Ofgem's price
average since the invasion and this will be factored
cap. It will feed through into consumer prices in October of this year.17
It is impossible to predict with any confidence where commodity prices in general and
been imposed on Russia's
energy prices in particular might go. Sanctions have not so far
commodity exports and Russia has not imposed any direct restrictions on delivery, though
pipeline flows have been lower than in recent years.18
But commodity markets have been affected by more than the direct sanctions on Russia.
- -
The possibility of sanctions and of Russian retaliation has clearly driven much of the
volatility in prices. Financial sanctions also appear to have had a 'chilling effect' on energy
related transactions with Russia.19 A discount has emerged in the price of Russian oil
14
This reflects the fact that Russia is less important for UK trade than its share of the world economy would
imply.
15
Beyond oil and gas, global wheat prices have increased by more than 20% since the invasion, corn prices
have increased by more than 10%. Aluminium and steel prices have also increased by more than 10%.
16
The New York Fed's
oil price model attributes all of the increase in the oil price since the invasion to
supply shocks. This is likely to primarily reflect developments in Russia.
17
In practice, Ofgem's October 2022 price cap takes into account forward prices from February 2022 to
August 2022.
18
The UK phase-out of imports of Russian oil and the US ban on imports of Russian oil and gas are notable
exceptions to this, although both countries are relatively small importers from Russia. The EU has also set
out plans to cut its gas imports from Russia by around two thirds.
19
'chilling effect' deters legitimate business because economic agents are afraid of being caught up in the
A
sanctions indirectly. See here for more on the effect.
relative to oil from other parts of the world (chart 9). And, irrespective of sanctions,
Russian gas supplies to Europe have declined compared to this time last year and many
Western companies have voluntarily stopped transacting with Russian entities.20
While we cannot predict with certainty how these markets will evolve, it is very probable
that energy and other commodity prices will be higher for longer.21 This would push up on
inflation and down on GDP in advanced economies (chart 10).
There are likely to be other impacts on the UK economy from the Russian invasion of
Ukraine. Higher and more volatile commodity prices and disruption of commodity supply
chains will have an adverse impact on the supply side of the economy.22 And the general
increase in uncertainty will weigh on both household consumption and on business
investment.
We are starting to see the prospect of weaker demand show up in household and
business surveys. In March, UK consumer confidence fell to its lowest level since
November 2020.23 PMIs are still strong but the forward-looking components have begun to
decline from very high levels.24
Relative to the MPC's February forecast,
these impacts will lead to a higher and more
protracted peak in inflation and intensify the squeeze on household incomes, as I have
said. We can see relatively clearly the direct impact of energy, goods and food prices on
CPI inflation. But forecasting the subsequent impact on household income and
consumption is more complex, given it depends on the degree of substitution away from
energy and the response of household saving, among other things.25
The MPC will not produce its next full forecast, which will work through these effects, until
May. But ahead of then we can conduct some simple thought experiments to get an idea
of the direction and scale of the energy impacts alone. If we use simple rules of thumb
about the pass through from energy prices to CPI inflation, and the response of economic
20
For example, the oil major Shell announced that it would no longer purchase Russian hydrocarbons.
21
Oil futures curves for contracts that would deliver oil three years from now show prices that are still more
than 5% higher than before the invasion. Gas futures curves converge on pre-invasion levels around one
year from now. But note that futures are very illiquid beyond the next couple of years so should be
interpreted with caution.
22
For example, there is evidence that volatility in oil prices reduces investment, regardless of the level of
prices, which would reduce the supply capacity of the economy.
23
See the GfK survey for further details.
24
See the PMI release for further details. In addition, nearly half of all UK businesses that have responded
to the Bank's ongoing
Decision Maker Panel survey reported that the Russia-Ukraine war will negatively
impact on sales.
25
There is material uncertainty around the degree of substitution away from energy that could take place in
response to the current shock. See here for a discussion in the German context.
activity, we can illustrate the potential impacts from just the energy price moves.26 The
latest data on energy prices suggests an impact of around 2 percentage points on inflation
and around 1% on the level of GDP relative to the February forecast (table 1). We should,
of course, treat these numbers as illustrative and partial indications of the potential scale.
The May MPC forecast is the next opportunity to undertake a full assessment of these
impacts.
Monetary policy implications
What implications does this have for monetary policy?
The first and most obvious point to make here is that, given the scale of the energy price
increase and the lags in monetary policy, there is little monetary policy can do to offset the
externally-generated pressures on prices and hence the very high inflation numbers we
are certain to see over the coming quarters. Nor can monetary policy do much to offset the
squeeze on household incomes that will result.27
What we can do is to ensure that when the current, extreme pressures pass, inflation
returns to its 2% target. In my view, that will require balancing two very different risks. The
first is ensuring that inflationary pressures do not become embedded in the domestic
economy in a way that would keep inflation above target even once energy and other
import prices have stopped increasing and possibly even start to decrease.
-
The risk here is that as we enter into a period of even higher inflation higher than we
-
have seen for 40 years with a tight labour market and strong pay growth, expectations of
businesses' and -
permanently higher inflation begin to drive workers' decisions and
crucially that these new norms became embedded deeply enough to withstand the
contraction in economic activity and employment we are very likely to see set in around
the end of this year.28
The risk on the other side is that we amplify the impact of the squeeze on incomes and,
given the lags in monetary policy, that our actions bear down on the economy as the rate
of growth in imported prices subsides, taking inflation well below our target at our policy
horizon. The February MPC forecast, which in line with our standard convention assumed
that Bank Rate followed the path implied by financial markets, had just such an outcome.
All else equal the invasion of Ukraine will have made such an undershoot more
pronounced.
At the last MPC meeting, shortly after the invasion, I voted against increasing rates. This
was not because I take the first risk lightly. As the oldest member of the MPC (by some
way) I remember very well indeed the extreme manifestation of such an inflation
psychology, which characterised the 1970s. I remember also the cost of correcting it.
But I do not think we are yet seeing a psychology of persistently higher inflation emerge.
The predominant driver of the growth we have seen in pay has been the tightness of the
labour market. There may also now be some element of catching up with inflation that has
already happened.29
Several measures of household and business inflation expectations have risen.30 We
should by no means ignore this but we should treat them with caution. As my colleague
Silvana Tenreyro has pointed out, there is some evidence that household inflation
expectations simply lag prices, particularly large increases in salient prices like petrol and
food.31 There is also large dispersion, which suggests people form expectations in very
different ways and this adds uncertainty. And it is those that might have the least wage
bargaining power that have the most volatile expectations.
businesses'
However, households' and norms are about to be tested by a period of even
higher inflation, after the social and economic upheaval of the pandemic which may also
have affected attitudes and norms more generally. And firms say to our Agents that they
are more willing to pass cost increases into prices and, though this is more marked for
goods than services, it is a noticeable departure from the pre-Covid period.32
But although the 1970s remains a salutary lesson in what can happen, we should not talk
ourselves into believing we are inevitably heading for a repeat performance. UK inflation
had been high for several years prior to the great supply shocks 50 years ago. The
institutional framework for monetary policy in the UK was very different then as were
labour and product markets. Labour market reforms, open markets and greater
competition mean firms and workers do not have the same pricing power.33 It is by no
means clear that, even with a period of high inflation, we would today see similar price and
pay increases in a period of subdued economic activity and higher unemployment.
So while I recognise the risk of second-round effects and that further tightening of
monetary policy might be necessary, I am not at present convinced that we will inevitably
have to lean heavily and constantly against an embedding of an inflationary psychology as
we progress through this challenging period and as the impact of higher commodity prices
on real household incomes depresses activity. Rather, we will need carefully to judge the
risks on both sides, weighing the evidence on the evolution of domestic prices, wages,
The MPC's next forecast will
activity and employment as it emerges. be the first
opportunity since the invasion to do that.
Financial stability
I want now to look briefly, and through the same lenses, at the impacts of the Russian
- the Bank of England's other primary objective.
invasion of Ukraine on financial stability
Again, the starting point matters. The UK banking system has emerged from the Covid
pandemic so far in a strong position.34 This reflects the fact that it went into the pandemic
with strong capital and liquidity positions, the result of the post financial crisis reforms
which included stress testing the major banks to ensure that they could withstand an
extreme but plausible stress scenario. They were thus able to maintain credit to the real
economy at the onset of the pandemic.
Subsequent fiscal support to the economy meant that the banking system did not need to
call on the buffers of capital and liquidity that had been built up. But extensive and
repeated stress testing during the pandemic gave us confidence that the banking system
could withstand further severe waves of the pandemic even if fiscal support to the
economy was absent.
The UK banking system exposure to Russia and Ukraine is small.35 It is, of course,
indirectly exposed through relationships with banks in other jurisdictions, but though some
banks in other jurisdictions have larger exposures, the aggregate risks do not appear to be
high.36
The impacts on the banking system are more likely to come through two channels. First,
and most directly, the impact of higher and more volatile commodity prices on the
financing of commodity trading and supply. And second, and more indirectly, through the
general impact of higher inflation and lower economic activity on banks' balance sheets.
I will discuss the commodity channel later. On the general economic impact, the current
high levels of capital and liquidity provide substantial resilience. The Bank of England's
annual stress test in 2019, which tested the system against a scenario of weak economic
growth and relatively high inflation, also provides assurance here.37
The starting position of non-bank finance, the universe of investment funds, insurance
companies and pension funds and the financial markets that serve and connect them, is
more complex. The non-bank financial system experienced major and very disruptive
- the so called 'dash
liquidity stress at the onset of the Covid crisis in March 2020. This run
for cash' -
was only broken by massive injections of liquidity into the system by central
banks.38
The non-bank ecosystem as a result has emerged from Covid with greater liquidity, which
will help to cushion liquidity stress. At the same time, however, investment portfolios have
begun to shift away from riskier assets as inflation has begun to rise and monetary policy
in many advanced economies has started tightening, not just after the Covid related policy
support, but after a decade of low rates and substantial QE.
The uncertainty and disruption, including of financial sanctions, generated by the invasion
of Ukraine, will make this shift more difficult to manage and, depending on the evolution of
the conflict, more extreme investor 'flights to safety' cannot be ruled out. Moreover,
although there has been substantial work to identify the causes of the 'dash for cash',
the
underlying liquidity fragilities have not yet been addressed.
So far, however, and despite some large moves39, financial markets have in general
managed the additional pressures related to the invasion in an orderly manner.
However, the impact has been far more pronounced commodity markets. The supply and
trading of commodities involves a complex system which includes producers, brokers,
trading houses, speculators and end users. It is financed by banks and non-banks and
makes extensive use of market platforms and clearing houses as well as over the counter
trading and hedging. It is tied together by a fabric of derivatives and physical supply
- -
contracts that enable the real economy participants producers and end users to have
certainty about future prices.
The extreme volatility and price increases in a wide range of commodities that I described
earlier (chart 11) has severely stressed this complex system. This stress has been
-
crystallised for many participants by the extra collateral, or margin, they need to put up
-
either to CCP clearing houses or bilaterally to other market participants when risks
increase and prices move against them.
By requiring parties to a derivative contract to put up more collateral as risk increases, and
requiring them to exchange gains and losses daily rather than letting them build up, margin
call protects the contract and limits counterparty credit risk. The financial crisis 15 years
ago demonstrated what can happen when participants lose confidence in the ability of their
counterparties to fulfil their contracts and when the derivative contracts that are intended to
protect against risk fail.
While the commodities supply and trading system has been severely stressed by some of
the consequences of the Russian invasion, we have not so far seen major disruption. With
the exception of one episode, markets have continued to operate. Market participants
have been able to meet margin calls, albeit with difficulty in some cases. Banks have
continued to finance the market. These markets are relatively small compared to financial
markets in general. However, their opacity makes it more difficult to monitor risks, and
given the interconnections with the financial system it is possible that feedback loops and
other mechanisms could amplify disruption, which might in turn impact both on the
financial system more generally and on the real economy. We need to be very vigilant to
these risks, as the Financial Policy Committee of the Bank has emphasised.
The episode I referred to earlier is the suspension of the market for nickel, at the London
Metals Exchange for a number of days after the market price quadrupled over two days.
These extreme market moves were very much greater than the moves seen in the market
for other industrial metals affected by the Russian invasion and clearly reflected other
factors.
The FCA and the Bank have announced reviews of the events at the market and the
clearing house respectively. There will, I am sure, be lessons to be learned, including
-
around the transparency and the operation of the market overall i.e. both the public and
-
the over the counter market and the resilience of participants. More generally, given the
role they play in the real economy and the links to the financial system, we may want,
when the dust has settled, to reflect on the resilience under stress of the commodity supply
system, including the financial services that support it.
Conclusion
I started this speech with the global economic recovery from Covid and have ended it
talking about the price of nickel. If there is a theme here it is that monetary and financial
stability, the Bank's twin objectives, are sometimes buffeted violently by exogenous events
-
a pandemic or, tragically as we see from the pictures emerging from Ukraine, by the
unprovoked aggression of one country against a peaceful neighbour. The Bank cannot
control or shape such events. What we can do, and what you can have confidence that we
will do, is to use our tools carefully and flexibly as these shocks pass through the economy
and through the financial system to deliver those objectives of monetary and financial
stability.
The views expressed here are not necessarily those of the Bank of England, the Monetary
Policy Committee or the Financial Policy Committee. I would like to thank Marilena Angeli,
Clare Ashton, Shaheen Bhikhu, David Curry, Oliver Davies, Chris Ford, Julia Giese, David
Glanville, Doug Rendle, Marek Rojicek, Andrea Rosen, Catherine Shaw, Brad Speigner,
Cormac Sullivan, Luc Tucker, Danny Walker, Charlie Warburton and Nora Wegner for their
help in preparing the text. I would like to thank Andrew Bailey, Colette Bowe, Sarah
Breeden, Huw Pill, Michael Saunders, Christina Segal-Knowles and Silvana Tenreyro for
their helpful comments.
Chart 1: Goods and services with high import intensity have inflation rates in the
UK that are high by historical standards
(a)
UK CPI inflation by component
Source: ONS
(a) The chart shows contributions to annual CPI inflation split by the import intensity of the underlying
category, taking into account direct and indirect import content.
Chart 2: UK household incomes held up more than GDP during Covid, partly as a
result of fiscal support including the CJRS
(a)
UK real household incomes and real GDP
Source: ONS
(a) The chart shows differences in real terms relative to 2019 Q4, the last quarter before the onset of the
Covid pandemic in the UK.
Chart 3: UK CPI inflation has been driven much higher by energy, goods and food
prices in recent months
(a)
UK CPI inflation by component
Source: ONS
(a) The chart shows contributions to annual CPI inflation split by category.
Chart 4: UK labour force participation is still yet to recover fully from the Covid
pandemic
(a)
UK labour force participation, employment and real GDP
Source: ONS
(a) The chart shows differences relative to 2019 Q4, the last quarter before the onset of the Covid pandemic
in the UK.
Chart 5: The lowest income households in the UK spend more of their income on
energy and food and save the least
(a)
Spending and saving by UK household income decile
Source: Living Costs and Food Survey, ONS
(a) Illustrative Bank staff analysis showing weekly spending on fuel (petrol, diesel and other motor oil),
beverages as a share of households' weekly
electricity, gas and other fuels and food and non-alcoholic
disposable income, for each gross household income decile, as well as the proportion of income saved each
week. The survey data covers the 2019-20 financial year. Mortgage principal repayments are included in the
measure of savings.
*On average, households in the lowest income decile reported spending more than their income each week
which may indicate they are running down savings (e.g. during retirement or a temporary period of
unemployment) or borrowing, but may also be a result of some misreporting.
Chart 6: Global oil prices have risen by 50% since the start of this year and by 20%
since the Russian invasion
(a)
Brent crude oil prices in 2022
Source: Bloomberg
(a) The chart shows the percentage change in the Brent crude oil price per barrel in dollars since the first
trading day of 2022. Key events labelled. Latest data close 31 March.
Chart 7: UK gas prices have been extremely volatile since the Russian invasion
(a)
UK natural gas prices in 2022
Source: Bloomberg
(a) The chart shows the percentage change in the spot UK natural gas price per therm in pounds sterling
since the first trading day of 2022. Key events labelled. Latest data close 31 March.
Chart 8: The volatility of oil and gas prices has picked up materially since the
Russian invasion
(a)
Brent crude oil and UK natural gas prices in 2022
Source: Bloomberg
(a) The chart shows the 5-day trailing standard deviation of the daily percentage change in the Brent crude
oil price and spot UK natural gas price since the first trading day of 2022. Key events labelled. Latest data
close 31 March.
Chart 9: Global oil prices have diverged from Russian prices
(a)
Brent crude and Urals oil prices in 2022
Source: Bloomberg
(a) The chart shows the Brent crude oil price per barrel in dollars since the first trading day of 2022 vs the
Russian Urals oil price. Key events labelled. Latest data close 31 March.
Chart 10: Illustrative assumptions suggest on the impact of higher energy prices on
inflation and GDP in advanced economies
(a)
Estimated impacts of energy price moves on inflation and GDP by economy
Source: Bloomberg, national statistics agencies, Bank calculations
(a) These ready reckoners are partial and are aimed at capturing the impact of rising oil and gas prices on
the level of consumer prices through (i) direct energy impacts (petrol and utility prices) and (ii) indirect effects
firms' costs.
through We also provide partial estimates of the impact on the level of GDP, by assuming that
increases in consumer prices feed through one-for-one into lower real incomes and lower consumption. We
assume no impact on the US from gas prices.
Chart 11: Many commodity prices have risen since the Russian invasion of Ukraine
(a)
Change in commodity price over specific periods
Source: Bloomberg
(a) The chart shows the changes in unit prices in dollars. Latest data close 31 March.
Table 1: Illustrative impacts of recent energy price moves on CPI inflation and GDP
(a)
based on rules of thumb for advanced economies
March MPC Start of March MPC
Relative to
Latest energy prices
announcement round
February
(31 March)
forecast
(17 March) (4 March)
E