9  8  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  8  official interest rates to close to zero and expanded their balances sheets progressively by around $ trillion or 13% of global GDP (Chart 8). Chart 8: Central Bank Balance Sheets  20000  USD (billions)  18000 16000 14000 12000 10000 8000 6000 4000 2000 0 2006  2007  2008  2009  Fed  2010  2011  2012  ECB  2013  BoJ  2014  2015  BoE  2016  2017  2018  SNB  2019  2020  Total  Source: Respective central banks and Bank calculations. Interestingly, this rapid growth in central bank money creation was not mirrored in money spending growth in the economy. In the ten years prior to the Covid crisis, narrow money globally rose by over 150%, while money spending globally rose by less than 50%. In the UK this contrast was starker still, with central bank money rising by around 200%, while money spending rose by less than 50%. 11 One way of reconciling these diffuse trends in the monetary and real sides of the economy comes from looking at a different measure of money - commercial bank money.
These include the rise of global trade and value chains which offer access to lower-cost inputs, lowering the price of final imported goods and services 8; demographic trends which have added to the economy’s labour supply, lowering wage costs 9; and increased automation and flexibility in the jobs market holding down wage growth and potentially flattening Phillips curves.10 Chart 7: UK GDP after the Great Depression and Great Recession  50 Cumulative percent change 40 30 20 10 0  Years 0  -10  t+1 t+2 t+3 t+4 t+5 t+6 t+7 t+8 t+9 t+10 t+11 t+12 The Great Depression  The Great Recession  Source: ONS and Bank calculations. These structural factors would, in theory, be expected to cause a downward shift in the price level rather than in the rate of inflation. But because these factors have played out over a lengthy period, they may have shown up in a persistent drag on measured inflation rates. For example, Faijgelbaum and Khandelwal (2016) estimate that global trade integration has lowered the price of the typical household consumption basket by between a quarter and two-thirds – a huge effect. This subdued pattern for global inflation, driven by demand and supply-side factors, has occurred against a backdrop of global monetary policies remaining highly accommodative, itself in part a response to these disinflationary forces. For example, in the aftermath of the global financial crisis, central banks lowered  8  Johnson (2018). Goodhart and Pradhan (2020). 10 Haldane (2018).