But monetary policy needs to be forward looking, so that does not add up to a compelling case for a change in monetary policy. The question is how has the growth and inflation outlook changed as a result. In my experience, recoveries have momentum. While growth might not be totally steady and even across sectors, as recovery progresses, various mechanisms begin to operate which can give it added momentum. Pressure on existing capacity grows, causing companies to dust off their investment plans. Supply chains tighten and firms start to re-stock. Memories of the uncertainty created by the shocks that generated the recession fades and confidence recovers. The labour market stabilises and unemployment should eventually start to fall, improving job prospects. These things happen over a period of time, so from month to month not much change may be perceptible. But looking back over a longer period, improvement is clear. In my view, this is the process that has been underway for the last year, and this process of gradual healing and recovery is likely to continue in the absence of big negative shocks which could derail growth. Given our experience over the last few years, we should certainly worry about future major shocks from the international economy. But the big downside worries resulting from the financial crisis which were present a year ago have receded, in my assessment. And the response of monetary policy has played a part in that process – though it has not been the only factor at work.
Andrew Sentance: UK monetary policy – how long should “The song remain the same”? Speech by Mr Andrew Sentance, Member of the Monetary Policy Committee of the Bank of England, to the Thames Valley Chamber of Commerce Group, Reading, 13 July 2010. *  *  *  I would like to thank Michael Hume, Tomasz Wieladek and Abi Hughes for research assistance and I am also grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. It is a great pleasure to be speaking to a business audience here in Reading, in the heart of the Thames Valley. This is an extremely successful economic region – with the highest GDP per head in the United Kingdom outside central London and the 14th most prosperous region in the whole of the European Union. 1 This track record of economic success reflects a concentration of high-tech and knowledge-based industries, particularly in the information and communications technologies sector. The Thames Valley economy also benefits from good transport links to London, other parts of the UK and international connections via Heathrow Airport, which is still Europe’s biggest aviation hub in terms of passenger numbers. It is not surprising, therefore, that a number of recent reports have highlighted the growth potential of this region in the current recovery.