we think the rate of growth of earnings in an underlying sense is probably around the 4 % level – higher than we saw before covid, and somewhat higher than we would expect to see in these economic conditions. but, there is another interesting development. the dispersion of pay growth has risen quite markedly – so for the high numbers we read about, there are also low ones. i am going to come back to this point. the final piece of the economic picture i want to cover is inflation. having been well below target last year and into this year, it has risen above rapidly, to 3. 2 % in august. much of the latest rise reflects base effects from last year, but we have also seen unusually strong rises in some items, including some foodstuffs, used cars and accommodation. our forecast in august had inflation rising to 4 % by the end of this year, and developments since then mean that inflation is likely to rise to slightly above 4 %. the major contributors to the further increase are not base effects but rather the strength we are now seeing in goods and energy prices. our view is that the price pressures will be transient – demand will shift back from goods to services, global supply the hard yards ‐ speech by andrew bailey | bank of england chains are likely to repair themselves, and many commodity prices have demonstrated mean reverting tendencies over time. but, the pressures are very much still with us, and there is still we believe pass - through to retail prices to come, and manufacturers ’ output prices are still rising rapidly. added to that is the uncertainty around how the labour market puzzle resolves itself, and how that will affect employment and earnings. meanwhile, just to remind, the recovery is weakening. a lot therefore turns on how effectively supply capacity is rebuilt and over what time, and how the labour market evolves. these are truly hard yards. for most of the rest of my time, i am going to turn to the setting of monetary policy. monetary and fiscal policy have operated independently but consistently – unsurprisingly i would emphasise – to provide the bridge through covid, supported i should add by the stability of the financial system and macroprudential policy. we have had to rely on asset purchases to do a lot of the work because of the proximity of interest rates to the lower bound. there is plenty of debate around qe, some parts of that debate are better founded than others. i am not going to cover that in

‐ 15 agriculture industry construction trade and transport ict ethnic minority minority ethnic finance real estate professional public sector other white white source : ons labour force survey and bank of england calculations. note : a positive ethnicity pay gap in this chart indicates that ethnic minorities earn less than their white counterparts, whereas a negative ethnicity pay gap indicates that ethnic minorities earn more than their white counterparts. if we look at ethnic minority workers at a more granular level, some interesting cohort effects emerge. there is a very wide dispersion of pay among different ethnic minority cohorts, with some having negative and others positive pay gaps compared with their white counterparts ( chart 15 ). median hourly pay is highest for those of chinese ethnicity, at just over £11, or around 15 % higher than for whites. there are also negative pay gaps, though smaller ones, for workers from a mixed / multiple ethnic and indian background. at the other end of the spectrum, there are significantly positive pay gaps for other ethnic minority cohorts, including black and afro - caribbean workers. the largest pay gaps are for workers from a pakistani and bangladeshi background, which average 13 % and 20 %, respectively ( chart 15 ). these large pay gap differences between different ethnic minority cohorts beg the question of whether it is useful to think about a single “ ethnicity pay gap ”. all speeches are available online at www. bankofengland. co. uk / speeches chart 15 : granular ethnicity pay gaps ethnicity groups mixed / multiple ethnic groups indian pakistani bangladeshi chinese any other asian background black / african / caribbean / black british other ethnic group ‐ 40 ‐ 30 ‐ 20 ‐ 10 ethnicity pay gap, per cent sample average source : ons labour force survey and bank of england calculations. note : a positive ethnicity pay gap in this chart indicates that ethnic minorities earn less than their white counterparts, whereas a negative ethnicity pay gap indicates that ethnic minorities earn more than their white counterparts. whether an ethnic minority individual is born in the uk or not also plays an important role in their pay. chart 16 shows that ethnic minorities born in the uk ( apart from those from bangladeshi and pakistani backgrounds ) earn more than uk - born white people. educational attainment is part of the explanation here. although ethnic minorities born in the uk are a small part of our sample ( 2 % ), they are almost twice as likely to have a degree relative to white uk - born workers ( 40 % versus 21 % ). in stark contrast, most ethnic minorities born