As you can see in blue in Chart 8, long-term sickness has driven much of the persistent rise in inactivity amongst 16 to 64 year olds since the start of the pandemic. That is a striking fact. As their number has increased, the inactive population appears more detached from the labour market. More of the inactive people now say that they would not like a job than before the pandemic, and fewer now expect to return to work. How should monetary policy respond to such a reduction in labour force participation? Bank of England  Page 13  The first thing to note is that this does not seem to be a case in which participation has fallen in response to weaker economic conditions and a weaker labour market. This is not a fall in participation driven by a shock to demand. So, we should not expect there to be a margin of spare capacity outside the workforce that exerts downward pressure on inflation in a way that would call for a lower level of interest rates to stimulate demand. Instead, the rise in economic inactivity is a change to the supply of labour, independent of demand, in particular by older workers. If those workers have accumulated enough savings to sustain a desired level of consumption much like the one they had before their early retirement, at least for a while, aggregate demand will not have fallen by as much as aggregate supply.
Norhana Endut: Keynote address at the Malaysian Financial Planning Council Keynote address by Ms Norhana Endut, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Financial Planning Council, Kuala Lumpur, 5 November 2022. *** It is my great pleasure to be here today at the 9th MFPC Graduation Ceremony. First of all, I wish to congratulate all successful graduates from the Class of 2019 to 2022. I am sure many of you have been waiting for this ceremony as it was postponed due to the pandemic since 2020. The critical role of financial planning is often overlooked. But one lesson that we can take from the recent pandemic and economic crisis is that a sound financial management and planning is critical in weathering the storm. It is your role now as Registered Financial Planners and Shariah Registered Financial Planners to take the stage in helping Malaysians manage and rebuild their financial standing post-pandemic and be prepared for the future. The Malaysian economy has recorded a strong growth momentum following the reopening of all the sectors in the economy this year. Key to this is the improvements in labour market, in particular, income growth. While there are reasons to be optimistic about the growth momentum, next year presents a more challenging outlook to the global economy with rising global inflationary pressures, signs of moderation in growth in several major economies, ongoing geopolitical conflicts and highly volatile financial markets. Malaysia is certainly not insulated from some of these headwinds.