A key part of our monetary policy is to anchor inflation expectations around our – price stability aim of a rate of below, but close to two percent over the medium term. Although our objective is forward looking, there is a risk that continued undershooting of our inflation aim will cause households and firms to revise down their inflation expectations.
As detailed in our most recent , we anticipate that GDP will continue to grow above trend over the next few years, which will see the unemployment rate decline further. This in turn should see wages growth pick up, providing a welcome boost to household incomes. The dynamics at play in the labour market are important considerations for monetary policy.