the lower short term expectations which result as well as further easing in labour market tightness. a short term outlook which is broadly characterised by recent trends continuing is consistent with there having been fewer shocks over the last few months. and this more benign environment for forecasting has contributed to the errors on the bank ’ s largely mechanical short term forecasting models for gdp, unemployment, earnings and inflation becoming more two - sided, although there remain differences in their relative performance. looking beyond spring 2024, i am much more comfortable, notwithstanding the continuing uncertainties, with the profiles and contours of our latest forecasts. this is quite a big change from my position a year ago when the high level of uncertainty and rapidly changing outlook led me to describe our central forecast as more like a “ baseline scenario ” ; and as a result i was focusing on the performance of the very short term forecasts to guide my monetary policy thinking. the evolution in my position reflects various factors : the improved performance of bank staff ’ s short - term forecasts ; a more well - founded set of conditioning assumptions, which i will return to ; the balance of judgements the mpc has made in successive forecasting rounds ; and the overall story about the economy that the forecast embodies. to recap, in our latest forecast gdp growth is projected to continue to flat - line through to the end of 2024 as restrictive monetary policy continues to weigh significantly on demand. based on the average relationships over the past between bank rate, other financial instruments and economic activity, bank staff estimate that more than half of the domestic impact of higher interest rates on the level of gdp is still to come through, with the peak impact on growth around the current quarter, although there is significant uncertainty around those estimates. growth picks up gradually through 2025 and 2026 but remains weak by historical standards, rising to only 1 per cent by the end of the forecast period. economic slack opens up with unemployment rising steadily but not sharply. in the modal, or most likely projection, inflation falls to 3. 1 % by the end of 2024 and returns to close to the 2 per cent target by 2025q4. bank of england perhaps the most striking feature of the forecast, from a monetary policy perspective, is that with subdued growth it takes another two years for inflation to return to target. this in turn reflects several significant judgements we have made in recent forecast rounds, all of which push up on inflation. for the avoidance of

bankofengland. co. uk / speeches it has been bolstered by two important institutional innovations since the crisis. the first is the handing of responsibility for the supervision of individual banks and building societies to the bank of england. that has meant a change in approach to supervision, to one that ’ s prepared to make judgements about risks and act pre - emptively. the second is the creation of a new authority in the bank – the financial policy committee – with new powers, tasked by parliament with monitoring risks in the financial system that could cause problems for the wider economy and with doing something about them. this has been christened ‘ macroprudential policy ’. macro because it ’ s focussed on the wider economy ; prudential because it ’ s about protecting that wider economy from excesses in the financial system. it is the institutional memory of the financial crisis ; designed to hardwire into the system the vigilance to growing risks and the imagination of their consequences that were so dangerously absent before the crisis. in short, someone has the job of worrying intelligently. is the same movie already playing again? now let ’ s turn to the movies. the old classic, debt strikes back, in which the spiral of complacency upends the economic galaxy, has been seen many times before. some say the film is being screened again now ; that households are simply addicted to debt and lenders are enabling that addiction. let ’ s put things in context. since the financial crisis, helped by low interest rates, britain ’ s households have reduced their debt. nevertheless, we do still have a high level of household debt by historical and international standards. as a share of incomes, consumer loans are actually smaller than they ’ ve tended to be in the past twenty years. it is mortgage debt that explains why debt levels are so high ( chart 6 ). mortgage debt is high, in large part, because housing costs are high. across the nation, the average house costs 4. 5 times income ( chart 7 ). all speeches are available online at www. bankofengland. co. uk / speeches an imbalance of demand for, and supply of, homes means it ’ s not just expensive to buy a home, it ’ s expensive to rent one too. those who rent in the private sector typically spend a third of their income on rent. how much would a first time buyer be willing to pay for a house financed with a mortgage if