extent upon judgement, given the uncertainties • about what is currently happening to demand, given the lags and contradictions in the data and the fact that they are in many cases subject to later revision ; • about the strength and persistence of the underlying forces driving demand looking ahead ; and • about the sensitivity of the various components of demand to changes in the level of interest rates. it can ’ t be said too often that the operation of monetary policy is an art rather than a precise science, although practising that art needs to be – and is – informed by as much science as we can bring to bear. for what it is worth, at the time of our last forecast in november, our central projection – on the assumption of 6 % interest rates – was for output growth of around 2½ % over the next couple of years, with rpix inflation remaining modestly below target this year but rising to 2½ % in 2002. there was, of course, a good deal of uncertainty around that central projection, as there always is, for the reasons that i ’ ve tried to explain. but on the basis of that forecast the short answer to the question : can our steady economic progress be maintained, over the next couple of years anyway, is a cautious “ yes ”. since that forecast was completed things have gone in different directions. the prospect for external demand has somewhat weakened and so too has the oil price. there are mixed messages relating to tightness in the labour market, but earnings growth has so far remained reasonably well contained - as it must continue to do. on the domestic demand side, private consumption growth has remained stronger than we had supposed, while the growth in private investment has been weaker ; meanwhile it is not clear that underlying public sector demand has – at least yet – picked up as rapidly as planned. the exchange rate has fallen, and so, too, have market interest rates. i would not venture to suggest how these – and all the other developments we look at – will influence our next forecast in february ; and it would be pointless to anticipate possible future policy decisions. i would be surprised if they radically altered the broad prospect of relatively steady progress over the next two years. but i can assure you of one thing : if the prospect – or the balance of risks around it – were to change significantly – either in the context of our february forecast or subsequently – we will promptly react to that change. despite the fact that we left interest rates on hold

compensation ( 5y2y forward swap ) sources : barclays live and bank calculations. the monetary policy response let me conclude by setting out how in response to these developments the mpc is setting monetary policy to ensure that cpi inflation will return to the 2 % target in the medium term. monetary policy is also acting to ensure that longer - term inflation expectations are anchored at the 2 % target. the mpc started to tighten monetary policy in december 2021, raising bank rate from 0. 1 % to 0. 25 %. so much has happened since but it is worth recalling that last december was less than three months after the end of the furlough scheme here in the uk and was when the rapid emergence of the omicron variant was a major concern. it was also three months before the fed started to tighten policy in the us and almost seven months before the ecb began the tightening cycle in the euro area. bank rate has been increased at every mpc meeting since december 2021 and was increased by 0. 5 % at both the august and september meetings, to its current level of 2. 25 % [ 9 ]. along with two of my mpc colleagues i voted for a larger 0. 75 % increase in bank rate, to 2. 5 % at the september 2022 meeting. at the time the three of us highlighted that the recent data outturns had already registered more persistent inflationary pressures and that mediumterm measures of inflation expectations remained high. we welcomed the reduction of the near - term peak in inflation which will result from the energy price guarantee but noted that the additional support it is providing to households will add to demand pressure. my september vote was informed by three particular aspects of what i ’ ve set out for you today. first the greater certainty we have about household spending, because of the greater support to demand being provided by the energy price guarantee. second the trends i ’ ve observed in domestically generated inflation, including in labour costs, in firms ’ pricing and in the broadening out in inflationary pressures with services price inflation now contributing more to overall cpi inflation. and third, higher medium - term inflation expectations and the risk that a more inflationary mentality takes hold throughout the economy. in my view a faster policy tightening at the last mpc meeting would have helped to bring inflation back to the 2 % target sustainably in the medium term and would reduce the risks of a more extended and costly tightening later. our november decision and latest forecasts will be