course, page 4 of 9 some individual industries may not have sufficient demand to sell all of their output – that will always be the case in any economy but at the aggregate level there is little evidence to indicate that a lack of demand has depressed real economic growth. if that were the case, we would expect to see that the sectors most badly affected would be the non - traded goods sectors of the economy, because these sectors are dependent fully on domestic demand. in fact the very opposite is the case. the services sector, which consists predominantly of nontraded goods industries, did much better than both industry and agriculture in the first half of the fiscal year, while our composite indicator of economic activity indicates that services also grew faster than the other sectors in the third quarter. that suggests that a shortage of aggregate demand is not the cause of the slowdown in growth in 2016 / 17. page 5 of 9 a sustained deficiency of aggregate demand would also lead to disinflation ( i. e. falling inflation ). but there is no evidence of this occurring. core inflation has been quite stable, at around 5 percent, for the last 9 months, which suggests that the level of aggregate demand is about right, given the economy ’ s capacity to supply goods and services, which as i noted earlier, has been temporarily depressed by the supply side shock to agriculture. on the subject of inflation, our forecasts indicate that core inflation should be in line with our 5 percent policy target in 12 months ’ time, which is the time horizon for our monetary policy decisions. our 12 month forecast for inflation has remained largely unchanged since the end of last year. however, some of the upside risks to core inflation, which we had identified six months ago, notably the rising food and fuel prices, and the risk of further exchange rate depreciation, have abated somewhat. page 6 of 9 food crop prices have risen steeply – annual food crop inflation was nearly 22 percent in april – but the pass - through to core inflation has been muted. the exchange rate has also been relatively stable in the first half of 2017. the nominal effective exchange rate, which takes into account exchange rate movements of the shilling against all our trading partners, has only depreciated by 1. 6 percent since the end of 2016. we also expect that the current food price shock should have started to ease by the third quarter of this calendar year, as the better weather that we are now experiencing boosts harvests, and

eddie george : a snapshot of developments in the global economy speech by the rt hon eddie george, governor of the bank of england, at the lord mayor ’ s dinner for bankers and merchants of the city of london at the mansion house, on 15 june 2000. * * * i spoke last year - somewhat hopefully, even optimistically for a central banker - about the still nascent global economic recovery from the asian crisis and its aftermath. but, more characteristically, i worried about the international imbalances affecting the major industrial countries, and the related imbalance within our own economy. the good news, my lord mayor, is that the global recovery has turned out to be rather stronger than we dared to hope a year ago. the world economy is currently growing at around its long - term trend rate - of 4 % or rather more - and is expected to continue to grow close to that rate over the next couple of years. although global inflation has meanwhile so far remained generally subdued, monetary policy in the major industrial countries - which had been directed to stimulus during the period of sharp world economic slowdown - has, to varying degrees, reverted to being less accommodating with the equally sharp recovery. the less good news is that the worrying international imbalances within and between the industrial countries persisted through most of the past year - though just between you and me, my lord mayor, and so long as you don ’ t breath a word to the chancellor, there is a glimmer of a suggestion - no more than that - that those imbalances may now be becoming somewhat less worrying. in the united states evidence of a sustained improvement in the rate of productivity growth has persisted. we, in this country, must fervently hope that the seeds of this technological modification are blown in our direction and find a receptive environment here. there is no obvious reason why we should be immune from this highly desirable infection - though sadly the symptoms of contamination are still hard to detect. in the meantime its supply - side effects in the united states imply that the us economy can sustain faster growth than seemed possible before, without necessarily overheating - at least for a time and up to a point. but the same developments have also helped to raise the temperature on the demand side of the us economy, and the federal reserve has been administering monetary sedatives at intervals throughout the past year. but finding exactly the right dosage, and the right timing, to keep the body temperature