Many of these implications are positive, for the benefits of integration over time are powerful and compelling for all economies. In important ways, economic integration may have made the principal job of central banks easier, by contributing to productivity growth and reducing some sources of inflation pressure, at least during the transition when a large share of the working age population of the world is being brought into the market. But the process of change in how economies and financial markets interact also complicates the task of central banks. Our understanding of the how these changes affect our capacity to forecast economic activity and inflation and our ability to assess how monetary policy affects the economy almost certainly lags the changes underway. In my remarks today, I will talk about some of the implications of these challenges for the conduct of monetary policy. I will focus on two features of what is happening in the world economy and financial markets today that are among the most interesting and consequential of the many questions we face today in thinking about the changes in the world economy and the task of central banking. These are, first, the behavior of forward interest rates in financial markets, and, second, the pattern of external imbalances. These features are interesting, in part, because they seem somewhat anomalous, or inconsistent with what the past has led us to expect. They seem likely to be related to each other and both are a feature of the changes underway in global financial integration.
The residual impact of the one-off factors on annual inflation is set to be entirely gone in one year’s time – in the first quarter of 2020. Now, I will say a few words about the economy and the forecast. Economic growth rates remain close to their potential levels. Unemployment is invariably low and close to its natural rate. Having said that, certain economic activity indicators continue to post a mixed performance. The forecast remains essentially unchanged. Given the state of the global energy market over recent months, we have downgraded the oil price path somewhat in the baseline scenario. The assumption has been updated to reflect faster declining oil prices in the course of 2019 – based on the calculation that the average oil price will total $ per barrel (from the previous estimate of $ a barrel). Moving forward, the average price is set to remain at this level between 2020 and 2021. As before, our approach to oil price assumptions is conservative. The oil price volatility we saw in the fourth quarter (from $ to $ a barrel) is an indication of the validity of this approach. The running fiscal rule will ensure that the impact of changing oil prices on economic growth 2/3  BIS central bankers' speeches  remains limited. We therefore leave our GDP growth forecast unchanged at 1.2-1.7% for 2019, admitting it may rise to 2-3% in 2021 as the Government implements its structural reforms. Changing oil price assumptions have stronger implications for our estimated balance of payments.