curtailed price increases on their own products to avoid losing sales. this all suggests that in an economy with well - anchored inflation expectations, relative prices adjust quickly to maintain the overall rate near target ; with domestic price inflation, for example, moving in the opposite direction to import price inflation. in effect, where the target is credible, the market adjustments to relative prices will do most of our work. that is another reason for paying very close attention to inflation expectations. the mpc has been successful over the years in maintaining inflation expectations at a rate broadly consistent with the inflation target. anchoring expectations in this way is important because it prevents the wage - price spirals that were a key part of the inflation process in the past. if wage and price setters believed that inflation was going to rise above the target, then they would make some allowance for this in setting 28 - 30, 2003. the bank for international settlements has also emphasised the ‘ increasing global character of the inflation process ’, see bis annual report 2006. current wages and prices. that would add to current inflationary pressure, requiring higher interest rates to control it. while there was some evidence of a pickup in the general public ’ s inflation expectations at the beginning of the year, probably in response to higher gas prices, they have fallen back a little since then and do not yet appear to have had any effect on actual wages or prices. conclusion to sum up, by delivering the inflation target the mpc seeks to produce a platform of stability. that doesn ’ t produce a quiet life for businesses – on the contrary it can make the pace of change quicker because it makes the underlying business imperatives clearer. in recent years, we have been helped in keeping inflation low and stable by the integration of new economies into the world market and the disinflationary pressure that has produced. as a result of that stability, the market and the public now expect inflation to remain around target and that appears to have helped to damp the impact of the recent oil price hikes on the overall inflation rate ; the total impact has been modest and there are no signs yet of spillovers into wages and prices. we do not know yet whether the benign international context will continue or what other shocks may occur. we are seeing renewed rises in energy prices this year which have helped push inflation back above target. our role is to continue to assess the situation as it develops, monitoring economic data, financial markets, and listening to our regional agents and their business contacts

’ ve never pretended that it is. but it can ’ t be just a matter of sweeping, broad brush, impressions based upon partial information either. what we have to do is to make the best professionally - informed analysis we can, of all the sources of information available to us, relating to every sector of the economy and every part of the country, and then constantly review and as necessary modify our judgements, month by month and quarter by quarter, in the light of the flood of new information as it becomes available. and that, of course, is exactly what we do in fact do - using the vast array of official economic statistics and financial market data, all the publicly available and some private surveys and commentaries, as well as a wealth of anecdotal and structured survey evidence that we collect ourselves, through our 16 non - executive directors, through the frequent visits which mpc members make around the country, and through meetings in london, and through our network of 12 regional, information - gathering and disseminating, agencies with their 7000 industrial contacts throughout the united kingdom. and we openly display the facts as they are available to us, as well as our analysis and our conclusions, regularly through the publication of the minutes of our monthly meeting and in the quarterly inflation report. so when people say to me that the economy is headed for recession, i ’ m interested in comparing the evidence on which they base their views with our own evidence, and i want to know whether or not they are also saying that they expect us to undershoot the government ’ s inflation target. let ’ s just for a moment turn down the noise and look at some of the relevant facts as they relate to the economy as a whole. since the economy started to recover from recession in the spring of 1992 - some 6½ years ago - overall output has grown at an average rate of about 3 %. that is well above the trend rate for the past 20 years, of just over 2 %. employment has increased by 1. 2 million over this period, while unemployment has fallen almost month by month, on the familiar claimant count measure, from a peak of over 10 % in 1993, to some 4. 7 % now. that is the lowest rate for 18 years. meanwhile retail price inflation ( on the government ’ s target measure ) has averaged around 2¾ % - that ’ s the lowest for a generation. there ’ s not much evidence here that low inflation inevitably means low growth and employment