In the run-up to my second visit, in June 1998 in Birmingham, we had again put up interest rates in successive steps, by 1¾% - with no one else to blame. But once more, following the conference - and again I imply no direct cause and effect - our next move, in October 1998, was to begin cutting rates. And here I am, my third attempt, only to find we’ve done it yet again - in the run-up to this conference we have once more raised interest rates in successive steps - by 1%. I make no prediction as to what might happen following this conference - one way or the other! Despite this unfortunate timing I’m very happy to be with you again this morning. My earlier experiences mean that I’m quite used to entering this particular lion’s den - even on this occasion Roger Lyons’ den! Good morning, Roger. I well understand that some of you - perhaps many of you - would like interest rates to be lower, in the hope particularly that this would also lower sterling’s exchange rate especially against the euro. And to be perfectly honest, if I were a farmer, or a steel maker, a motor manufacturer or even a hotel operator, indeed anyone competing primarily with Continental European producers right now, from my own, microeconomic, standpoint, I’d find that tempting too.
But alongside low inflation we’ve had the lowest nominal interest rates that most of us can remember. Short-term rates have averaged some 6¼% compared with some 11¼% over the preceding decade. And 10-year government bond yields have fallen, with inflationary expectations, to around 5¼% which apart from a brief period last year is the lowest they’ve been for nearly 40 years. Much more fundamentally we’ve enjoyed the longest period of uninterrupted, quarter by quarter, economic growth since records began some 45 years ago - with annual growth averaging 2.8% - between ¼ and ½% above most estimates of our underlying trend rate. The number of people in employment is the highest on record. And unemployment has fallen from a peak of 10½% on a claimant count basis to the present rate of 4%. That is the lowest for 20 years in the UK as a whole, and just about the lowest in nearly every region. This is not just past history. Having come through the global economic slowdown a year or two ago, the economy as a whole is now again growing at well above trend, with inflation a bit below target; and the broad prospect for the next couple of years - on most forecasts, including the MPC’s February forecast based upon our collective best assumptions - is for continuing relatively strong growth with relatively high employment and relatively low inflation.