’ s central view of wages in the february inflation report. wage growth is projected to rise, reaching 3. 4 % by end - 2015. in effect, wages error - correct. there is some tentative evidence of wage growth picking up over the past few months, although yesterday ’ s wage data were notably weaker. if this pick - up were to continue, the wage puzzle would have been benign. indeed, with slack eroding, we might then be concerned that wage pressures could overshoot, posing upside risks to the inflation target. 7 but there are other explanations of the wage puzzle which pose downside inflation risks. one is that the phillips curve has become less steep than in the past. this would mean that a fall in unemployment might have a lower impact on wage pressures than in the past. this might arise because the pool of workers willing to enter the labour force at the existing wage rate has increased – for example, older workers prepared to work longer than they had planned or workers from overseas moving into the uk labour force. there is evidence of many of these trends intensifying over the past few years. for example, the unemployment rate among 18 - to - 24 year olds has fallen by almost 4 percentage points over the past year. the trend in labour force participation rate has picked up significantly among women and older cohorts over the same period. and net migration to the uk was estimated to be almost 300, 000 in the year to september 2014, almost double the level two years earlier. for example, weale ( 2015 ). bis central bankers ’ speeches there is evidence, in the uk and internationally, to support the phillips curve having flattened over time. for example, cross - country evidence from the imf suggests that the slope of the price phillips curve has fallen, from around one in the 1970s to 0. 1 – 0. 2 today ( chart 16 ). that could reflect the effects of globalisation, enhancing competition in domestic labour and product markets. 8 the implications of a flatter phillips curve for future wage growth and inflation can be assessed by rerunning the projections from the mpc ’ s february inflation report. specifically, assume a halving of the phillips curve slope used in the model of chart 15, from 1 to 0. 5. 9 that slope is still well above the levels in chart 16. chart 16 : imf estimates of global price phillips curve slopes interquartile range median 2. 0 1. 5 1. 0 0. 5

in stimulating demand and inflation expectations. in practice, the effects of a policy easing cannot be known with certainty and bis central bankers ’ speeches policy credibility cannot be guaranteed. moreover, there are upside as well as downside risks to the inflation outlook. nonetheless, these experiments are in my view the right baseline when assessing the appropriate policy stance today. conclusion inflation has dropped like a stone over the past year, to close to zero. this largely, but not wholly, reflects external forces. on the mpc ’ s central view, inflation will remain close to zero in the near - term, before rising to reach the inflation target over a two - year horizon. the risks to inflation at that horizon are plainly two - sided. but my personal view is that these risks are skewed to the downside. in my view, that means policy needs to stand ready to move off either foot in the period ahead to meet the symmetric inflation target. thank you. references ball, l ( 2006 ), “ has globalisation changed inflation ”, nber working paper 12687. bank of england ( 2015a ), “ agents summary of business conditions ”, february 2015, available at : http : / / www. bankofengland. co. uk / publications / documents / agentssummary / 2015 / feb. pdf. bank of england ( 2015b ), “ letter from the governor to the chancellor ”, available at http : / / www. bankofengland. co. uk / monetarypolicy / documents / pdf / cpiletter120215. pdf. bell, d and blanchflower, d ( 2011 ), “ underemployment in the uk in the great recession ”, national institute economic review no. 215. bell, d and blanchflower, d ( 2013 ), “ underemployment in the uk revisited ”, national institute economic review no. 224. bernanke, b ( 2006 ), “ global economic integration : what ’ s new and what ’ s not? ”, remarks at the federal reserve bank of kansas city ’ s thirtieth annual economic symposium, jackson hole, available at : www. federalreserve. gov / boarddocs / speeches / 2006 / 20060825 / default. htm. bis ( 2014 ), “ inflation : domestic and global drivers ”, bis 84th annual report page 49 onwards. borio, c and filardo,