Indicators of uncertainty have declined since the November Report, broadly as the MPC had expected. 1.4%. Demand growth begins to exceed potential supply growth in mid-2020. The factors behind that decision are set out in the Monetary Policy Summary on page i of this Report and in more detail in the Minutes of the meeting. The outlook for productivity growth will also be significantly affected by the nature and impact of the UK’s new trading relationship with the EU. That slowing has been driven partly by weakening global growth…. Those uncertainties had an especially large effect on business investment, leading firms to delay spending until they had more clarity about the future trading environment. International risky asset prices have also increased. It is also possible, especially further out in the forecast, that firms are able to cut back the amount of resources they spend on Brexit planning. Chart 1.5 depicts the probability of various outcomes for CPI inflation in the future. Weaker productivity growth also reduces the extent to which companies can increase output and therefore pay. Second, the medium-term path for house price inflation is … Spare capacity within firms is eroded. UK demand growth remains subdued in the near term but is projected to pick up gradually as global growth recovers and as the decline in uncertainty boosts spending. Indexed to equal zero in 2007 Q3. The MPC’s projection for CPI inflation over the next three years is slightly lower than in November. Partially offsetting those effects is slightly greater upwards pressure from the more immediate introduction of trade barriers. If economic circumstances identical to today’s were to prevail on 100 occasions, the MPC’s best collective judgement is that the mature estimate of GDP growth would lie within the darkest central band on only 30 of those occasions. Latest data are for December 2019. The weakening in global growth has in part reflected the impact of increased trade protectionism and the associated rise in uncertainty, as well as the past tightening in global financial conditions and domestic weakness in some emerging market economies (EMEs). Over the forecast period, this has been depicted by the light grey background. We produce forecasts for the Consumer Prices Index (CPI inflation) and the Retail Prices Index (RPI inflation). Since the November Report, sterling has appreciated by around 1½%. Productivity growth is weak in the first part of the forecast period. ... is currently constructed as a 15-day average of the instantaneous forward OIS rates that fall in each quarter of the forecast horizon. The fan begins in 2019 Q4, a quarter earlier than the fan for CPI inflation. That would drag on productivity growth. The MPC judged in its annual assessment of supply that the economy has a margin of spare capacity. Those cost pressures are passed through to CPI inflation. Further out, it picks up somewhat as some of the effects of Brexit-related factors fade. Based on DFEG+L635+L637. That spare capacity lies within companies, with little slack apparent in the labour market. Forecasts reported that the annual inflation rate will have been between 1.8% and 2.6% depending on the data source by 2019. Forward interest rates suggest that monetary policy will remain accommodative. Over the forecast period, this has been depicted by the light grey background. Support from these factors is sufficient to boost demand growth above weak potential supply growth. Constructed using real GDP growth rates of 189 countries weighted according to their shares in world GDP using the IMF’s purchasing power parity (PPP) weights. 1.2%. Global business confidence and other manufacturing indicators have generally picked up. Based on NRJS. Constructed using real GDP growth rates of 188 countries weighted according to their shares in UK exports.