5  David Miles (2011), “Mortgages and Housing in the Near and Long Term”, http://www.bankofengland.co.uk/publications/speeches/2011/speech488.pdf  4  BIS central bankers’ speeches  The Economic Outlook CML Mortgage Industry Conference London Charlie Bean, Deputy Governor Monetary Policy 03 November 2011  BIS central bankers’ speeches  5  Chart 1: UK activity Real GDP  PMI surveys  Percentage increase on a quarter earlier  1.2  CIPS services ouput CIPS manufacturing output  Index, 50 = no change 65  0.9 60  0.6 0.3  55  0 50 -0.3 -0.6 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3  45 Jul 09  Jan 10  Jul 10  Jan 11  Jul 11  Chart 2: International activity Composite PMI surveys  Real GDP Percentage change on a quarter earlier  US Euro area  1.2  Index, 50 = no change US  1  Euro area  65  60  0.8 55 0.6 50  0.4  45  0.2 0 2009 Q3  6  2010 Q1  2010 Q3  2011 Q1  2011 Q3  40 Jul-09  Jan-10  Jul-10  Jan-11  Jul-11  BIS central bankers’ speeches  Chart 3: Euro-area sovereign and banking risks CDS-based bank default risk  10-year government bond spreads  Basis points  Percentage points Portugal  Ireland  Italy  Spain  France  UK  12  800  Austria, Belgium, France, Germany and Netherlands  10  Greece, Ireland, Italy, Portugal and Spain  8  UK  6  US  600  400  4 200 2 0 Jan 10  Jul 10  Jan 11  Jul 11  0 Jan 10  Jul 10  Jan 11  Jul 11  Chart 4: Change in net exports after big sterling moves Percentage point contribution to GDP 3.0 1996 Q1 (22%) (inverted) 1992 Q2 (-14%)  2.0  2007 Q2 (-25%) 1.0  0.0  -1.0 -6  -4  -2  0  2  4  6  8  10 12 14 16  Quarters before/after start of exchange rate movement  BIS central bankers’ speeches  7  Chart 5: Output losses after banking crises Percent of pre-crisis trend; mean difference from year t = - 1 20 10th-90th percentile Interquartile range Estimated mean path  UK  10 0 -10 -20 -30 -40  -1  0 1 2 3 4 5 6 7 Distance in years from the first year of crisis  * UK observation for year 3 based on Q1-Q3 data for 2011  Chart 6: UK inflation Per cent Estimates of VAT, energy and import price contribution  7 6 5  CPI inflation  4 3 2 1 0  - CPI estimates excluding - VAT, energy and import price contribution 2008 2009  8  -1 -2 -3 2010  2011  BIS central bankers’ speeches  Chart 7: Commodity prices Index: Jan 2010 = 100  180  Oil Metals  160  Agricultural 140  120  100  80 Jan 10  Jul 10  Jan 11  Jul 11  The Economic Outlook CML Mortgage Industry Conference London Charlie Bean, Deputy Governor Monetary Policy 03 November 2011  BIS central bankers’ speeches  9

Our assessments on economic outlook suggest a continuation of economic growth for the rest of the year. Foreign demand and public sector demand continue to provide positive contribution to aggregate demand upsurge, although more moderately than a year earlier. Private sector demand remains an important factor to determine economic growth in the future. Fiscal consolidation measures and the unfavourable situation in global markets and our trade partners will shift the short-term focus of economic growth to the internal demand: private consumption and investments. The capacity of these aggregates to compensate for the slowdown of the two main promoters of the insofar growth, will condition Albania’s economy performance over the upcoming 2–3 quarters. In the longer run, the performance of the Albanian economy shall be determined by its competitiveness and productivity as well as expansion of Albanian goods and services in foreign markets. This requires intensification of structural reforms at macroand microeconomic level as well as financial and macroeconomic stability in the country. *** Taking into account the information set out above, the Supervisory Council of the Bank of Albania deemed that inflationary pressures are downward and remain controlled in the medium run. Developments in the Albanian economy will continue to generate weak inflationary pressures, as a result of the negative output gap action. On the other hand, pressures generated by developments in global economy are expected to be downward. Economic agents inflation expectations remain anchored around the Bank of Albania target.