The outlook for inflation, real incomes and overall economic activity is particularly uncertain, linked as it is the prospects for energy prices, the capacity for businesses and households to absorb higher costs, and the extent to which wages and profits respond to higher-for-longer inflation.
Had energy prices proceeded as expected by financial markets in July, our projection was that Modified Domestic Demand would have grown by around 4 per cent this year and next, with HICP inflation easing towards the end of this year and trending downwards to just above 2 per cent by 2024.