If some weight is given to the final two explanations, the risks to future wage growth and inflation would be skewed to the downside, not only in the short-term but at longer horizons too.11 (b)  Inflation expectations  Chart 18: Projection for wage growth and inflation, assuming a starting level of slack of 2%  Percentage change oya  6 4 2 0 -2 -4  Wages - February IR projections Wages - more slack Inflation - February IR projections Inflation - more slack  A complementary explanation for the wage puzzle, which goes in the same Source: ONS and Bank calculations. direction, is that inflation expectations have shifted downwards. To the extent these weaker expectations shape firms’ wagebargaining and price-setting behaviour, this would impart downwards persistence into wage and inflation dynamics. There is an array of inflation expectations measures covering different sectors – households, companies, financial markets – and horizons – short and longer term. All of these measures have fallen over the course of the past two years, as actual inflation has fallen, though often by differing amounts. Among households, one-year-ahead inflation expectations, as reported by Citigroup, have fallen by 120bp over the past year. At the five to ten year horizon, they have fallen by around 30bp (Chart 19). Shorter-term expectations are around 1.5 percentage points, and longerterm expectations around 1 percentage point, below their pre-crisis averages.
03.03.2020  Challenges of population ageing from a central bank perspective Public Lecture at the International Center for Monetary and Banking Studies (ICMB), Geneva Pablo Hernández de Cos Governor  Good afternoon. Let me start by thanking Professor Ugo Panizza for his invitation to participate in this public lecture organised by the International Center for Monetary and Banking Studies. I cannot think of a better place to share some thoughts on population ageing and the challenges it poses, in particular from a central bank standpoint. In my talk I will first describe the process of demographic transformation the world is undergoing. Next, I will shed some light on the challenges that population ageing poses to macroeconomic developments and policies. Finally, I will focus on the implications of an ageing society for the financial system. The demographic transformation  In recent decades, countries around the globe have been experiencing population ageing, a phenomenon poised to transform the societies and the economies in which we live. Currently, according to the United Nations World Population Prospects, 1 in 11 people in the world is over 65, up from 1 in 20 people back in 1950. Indeed, thirty years hence, projections point to the percentage of people over 65 reaching 16% of the population, in other words 1 in 6 people. The figures are quite telling. Actually, the world demographic structure no longer resembles a population pyramid. Rather, it is turning into a slender tower.