above potential growth and to average between 1. 7 % and 2. 2 % in 2017, 2018 and 2019. the risks to the growth outlook are broadly balanced : on the upside, the current cyclical momentum could result in stronger than expected growth, while the remaining downside risks relate primarily to global factors and developments in the exchange rate. from today ’ s point of view, the strength and resilience of the recovery tends to foster our confidence that reflationary forces will gradually support a return of headline inflation towards a level that is below, but close to, 2 % over the medium term. but inflation dynamics remain subdued. after hovering at levels well below 1 % for three years, with occasional dips into negative territory, euro area headline inflation edged higher towards the end of last year and stood at 1. 5 % in september according to eurostat ’ s flash estimate. owing to energy - related base effects, headline inflation rates are likely to temporarily decline towards the turn of the year. looking further ahead, as reflected in the latest ecb staff projections, headline inflation is expected to remain notably below a level that is consistent with our inflation aim over the next two years, averaging 1. 5 % in 2019. furthermore, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium - term outlook for price stability. some measures of underlying inflation – which is more closely related to domestic price pressures – have ticked up moderately in recent months. for example, hicp inflation excluding food and energy had been stuck below 1 % for around three years, but was 1. 1 % in september. nevertheless, underlying inflation pressures are still too weak and have so far failed to show convincing signs of a sustained upward trend. an important element keeping underlying price pressures subdued is muted wage dynamics, which are shaped by many factors. in addition to weak productivity developments, the significant degree of remaining labour market slack is limiting wage growth. when assessing slack, it can prove useful to also look at broader measures than the unemployment rate. the so - called “ u6 measure ” captures unemployment, underemployment ( meaning workers who would like to work more hours ) and marginal attachment, namely those workers that are not competing very actively in the labour market, for example because they are not available to start a new job at short notice. this measure currently covers just below 18 % of the labour force and is thus considerably higher than the unemployment rate

nothing in the facts about the scottish economy to suggest that the pursuit of monetary stability in the uk as a whole is in any sense at the expense of growth and employment north of the border. indeed it seems clear on the facts that over time the scottish economy prospers very much in line with the economy of the uk as a whole. so let ’ s keep the national conflict where it belongs - on the rugby field! now, mr chairman, what certainly is true is that recent upheavals in the world economy have had a damaging impact on particular businesses and particular sectors of the uk economy - including particular businesses and sectors of the scottish economy, which has greatly complicated our conduct of monetary policy. you are all of course familiar with the global financial shock which hit asia in 1997 and spread to other emerging market countries and transition economies through 1998 and the early part of last year. this shock impacted the uk economy in two main ways. first, the withdrawal of external finance from the immediately affected countries meant that they had no option but to rein back their domestic economies, resulting in a sudden, sharp, slowdown in world demand - including demand for industrial countries ’ exports. that in turn had the effect of dampening aggregate demand in the industrial countries. had the industrial countries - led by the united states and the united kingdom and closely followed by the eurozone and subsequently also by japan - not acted to stimulate their own domestic demand, we could indeed have seen the serious world downturn which many were anticipating only a year or so ago. in the event, the global slowdown was contained, but at the expense of the build - up of substantial external imbalances within the world economy, and at the expense, too, of substantial imbalance between strong domestic and weak net external demand in a number of industrial countries - most notably in the us and here in the uk. second, these developments in the world economy had a major impact on the international pattern of exchange rates. in the first place, many of the countries most adversely affected by the interruption of international financial flows saw their currencies fall dramatically in foreign exchange markets. but there were also important secondary effects on the relationships between the major industrial countries ’ currencies. the dollar and sterling - which have in fact been reasonably stable against each other since we came out of the exchange rate mechanism - strengthened, notably against the euro, notwithstanding reductions in our relative interest rates, perhaps on the expectation that an earlier or stronger pick - up