Data has been weighted to the known offline population proportions for age, gender, government office region, working status and social grade. Respondents were asked, “as a result of the coronavirus pandemic, would you say that your household savings have increased, decreased, or stayed the same?”  Chart 13: Sterling deposits held by households and PNFCs (monthly flows into M4ex) Households  £ billion  PNFCs  60 50 40 30 20 10 0 -10  Jan - 19  Apr - 19  Jul - 19  Oct - 19  Jan - 20  Apr - 20  Sources: Bank of England and Bank calculations. Note: Chart does not include flows into non-intermediate OFCs’ M4. 14  All speeches are available online at www.bankofengland.co.uk/speeches  14  Which of these two paths will play out in practice? Back in May, the MPC observed that the balance of risks to the outlook was skewed to the downside. Subsequent positive news on demand has, in my opinion, more than counterbalanced the rise in downside risks to employment. To my mind, this leaves risks to the outlook slightly more evenly balanced than in May, if still with a downside skew. “The Fourth Quarter”  Looking beyond 2020, there is plainly a high degree of uncertainty about the economy. That in part reflects uncertainty about the virus and the policy responses to it. But it also reflects uncertainties about the path of the economy itself.
A third factor is that the fracturing of supply chains during the Covid crisis, national and international, would tend to increase the cost of goods and services, if it proves durable. Against these inflationary forces of course needs to be weighed the disinflationary effects of much higher degrees of (double jeopardy) uncertainty, weaker demand and potentially higher saving rates in the economy. With heavy weights on either end of the inflationary see-saw, it is unclear at this stage which will tip the balance. Those uncertainties are, to some extent, reflected in the differing responses of agents’ inflation expectations. Since the crisis, households’ expectations have tended to drift up, companies’ expectations have drifted down and financial markets’ expectations are relatively unchanged. Given the strong forces acting on inflation in either direction, the MPC is being especially vigilant in monitoring trends in inflation expectations. Perhaps the long-range forecast about which I have greatest confidence concerns the data and statistics used, by the Bank and others, to monitor the economy. The emergence of a new suite of fast indicators, including from the UK Office for National Statistics, has significantly shifted the technological frontier when monitoring the economy. That shift is likely to be permanent, improving the granularity and the timeliness of both our statistics and our understanding of economic trends. The Policy Response  Let me conclude by discussing the policy response to these searing developments in the global economy. Like the crisis itself, these responses have been unprecedented in speed and scale.