During the forecast period, we expect CPIF inflation to first fall to around 1 per cent, but then to rise again to around 2 per cent at the end of the forecast period. CPI inflation fell dramatically during the crisis as a result of our repo rate cuts, but it will increase to a level higher than CPIF inflation as we increase the repo rate to a more normal level. When we compare various measures of resource utilisation with the forecasts we make for inflation in the latest Monetary Policy Update, the following picture emerges. Underlying inflation measured in terms of the CPIF begins to rise in 2011. By that time, resource utilisation measured in terms of variables such as the RU indicator, shortage of labour in the business sector, capacity utilisation in the manufacturing industry, the employment rate and the HP trend-based measures the employment gap and the hours gap will probably already have risen to above-normal levels. Underlying CPIF inflation will then rise to 2 per cent at the end of the forecast period. Resource utilisation measured using the GDP gap based on HP trends will then have reached a normal level. The HP gap will then be more or less zero. My own assessment is also that the GDP gap will then have reached the zero level. However, even by the end of the forecast period, unemployment will not have reached the average level in the years before the crisis. Our forecasts thus paint a rather complex picture.
That, in our context, is I think now much easier to understand than a more consensual approach would be, but there was certainly a learning period. It has been suggested to me that the arrangements I have described somehow diminish the position of the Governor. Well if that’s true this Governor at least welcomes it! I am sure that all of you are well aware of how finely balanced monetary policy decisions are at the margin, and that all of you have agonised, just as I have, over the right thing to do and the right time to do it. I find the cross-bearings on those decisions provided by the other Committee members - and they are I remind you all highly qualified experts in their own right - immensely reassuring. If a majority of them argued for a particular decision, that would certainly weigh heavily with me, although - as a matter of personal integrity - I always reserve the right to take a different point of view from that of the majority on those occasions when I am particularly confident of my own judgement. That has not so far happened but it almost certainly will; people should not be unduly surprised. Finally, in relation to monetary policy, let me say a few words about accountability.