it operates, these monetary policy judgements depend not just on inflation and output today, but on their expected path in the period ahead. for example, current uk inflation is being boosted significantly, but temporarily, by price pressures arising from sterling ’ s depreciation last year. once these effects abate, the path of inflation will depend on the evolution of domestic costs. the behaviour of wages, and developments in the jobs market more generally, will be crucial in determining that evolution. that being the case, i wish to begin by discussing some of the factors affecting wage growth, in the recent past and in the future, including those arising from structural shifts in the nature of work. i will then turn to the implications of recent developments in the economy for monetary policy in the period ahead. work and wages wages have been surprisingly weak for much of the period since the global financial crisis. chart 1 plots successive bank of england forecasts of wage growth since 2012. wage growth in the uk has persistently disappointed to the downside, on average by around 1 ¼ percentage points one year ahead. part of the explanation lies in weak uk productivity, a key determinant of firms ’ ability to pay workers. this, too, has persistently disappointed to the downside, with a mean error of around 1 percentage point one year ahead. nonetheless, it is clear that wages have been weaker than can be explained either by slow productivity growth or by the other factors which typically affect wages, including the degree of slack in the labour market. this can be seen by looking at the unexplained components from the bank ’ s wage equations ( chart 2 ). these residuals have been predominantly negative over recent years. that is despite on - going refinements to the bank ’ s judgements on the labour market, as wages have come in short of expectations. this weakness in wages is the more surprising because it has come against a backdrop of a booming jobs market in the uk. employment has increased by around 2. 5 million people since 2011. unemployment in the uk has fallen from its peak of 8. 5 % in 2011 to almost 4. 5 % currently. it has also fallen significantly in every region in the uk. here in yorkshire, unemployment has fallen from 10 % to around 5 % over the past few years, its lowest level since the 1970s. historically, there has been a reasonably strong and stable relationship between unemployment and wage growth – the so - called phillips curve. as unemployment has fallen

could herald the beginning of the end of the protracted post - crisis super - cycle of weak investment. at a regional level, the global recovery appears to have a broad base across the world. most regions of the world have seen growth upgrades over the past six months. currently, countries representing around 80 % all speeches are available online at www. bankofengland. co. uk / speeches of global output are expected to be growing above - trend, meaning the global output gap is shrinking. the simultaneity of that uptick in regional growth should give it greater momentum, given the increased importance these days of cross - border spillovers, in trade and finance, and integrated global supply chains. a second reason for greater resilience in world growth since the start of the year is reduced political and policy uncertainty. for anyone who has lived through the uk ’ s political undulations of the past few weeks, or who is consuming a daily diet of world news, blogs and tweets, that may sound like an odd statement. but, viewed in the round, political and policy risks in a number of countries have eased significantly since the start of the year. at the start of the year, there was widespread media and market concern about changes to economic, trade and foreign policy in the us. by and large, the worst of these fears have failed to materialise. at the start of the year, there were fears of a populist surge through europe. these risks have failed to crystallise, first in the netherlands, most recently in france and most probably in germany later this year. this is not to suggest geo - political risk has disappeared, merely that some important risks have failed to come to pass. alongside upgrades to growth, this fall in political risk seems to have contributed to a rise in global asset prices and a fall in global risk premia. equity prices in the us and euro area have each increased by around 8 % since the start of the year. the vix, a measure of uncertainty in financial markets, has fallen to levels not seen since 2007 ( chart 14 ). media - based measures of uncertainty remain elevated. but these measure political news, of which there has been plenty, rather than political uncertainty. and it is the latter, rather than blogs, tweets and news feeds, that matter to most people when making decisions about spending. third, as the world economy has gathered pace and resilience, there are signs downside risks