Chart 5: Population ageing is expected to continue Age distribution in the adult (16+) UK population (a)  (a) Dashed line and hashed bars are calculated using the ONS 2020-based interim national population projections: year ending June 2022 estimated international migration variant. Sources: ONS and Bank calculations. Chart 5 shows the age distribution for the United Kingdom. The share of the adult population aged 20-59 has fallen below 65% in the past decade, and it is set to decline further in the coming years. This population ageing has been driven by a decline in birth rates relative to the high levels seen in the years that followed the Second World War – as well as by the happier news that people now live for longer. As people accumulate savings over their working life to fund their retirement, wealth in the economy increases as the age distribution shifts towards older cohorts (indicated in this chart by bars in different colours). So ageing households have sought to lend more at a time when less productive firms have sought to borrow less. The only way to establish an equilibrium between the supply and demand in the market for investable funds – that is, to incentivise firms to invest this  Bank of England  Page 9  additional wealth into productive capital – has been for the price of those funds, the real interest rate, to fall. The trend equilibrium rate, R*, is like a long-term anchor for monetary policy.
Birgir Ísleifur Gunnarsson: Review of economic and financial development in Iceland in 2004 Address by Mr Birgir Ísleifur Gunnarsson, Governor and Chairman of the Board of Governors of the Central Bank of Iceland, at the Bank’s Annual Meeting, Reykjavík, 30 March 2005. *  *  *  On behalf of the Board of Governors of the Central Bank of Iceland I welcome you all to the Bank’s 44th annual meeting. The Bank’s financial accounts for the year 2004 have been ratified today by the Prime Minister. The Bank’s annual report has also been published. It includes a survey of the Bank’s activities and operation, along with a report on the Bank’s monetary policy and actions, the financial system, financial stability and the financial markets, and the main features of economic developments in the course of last year. Under the Act on the Central Bank of Iceland that was passed by Parliament four years ago, the main objective of monetary policy is price stability. The joint declaration by the Government and the Central Bank from March 27, 2001 set a formal inflation target for the Central Bank, i.e. it is obliged to aim at a rate of inflation, measured as the annual twelve-month increase in the CPI, of as close to 2½% as possible.