Andrew Bailey, Governor of the Bank of England (BoE), visited LSE this week in an event chaired by Baroness Minouche Shafik, President and Vice Chancellor of the university. He addressed a packed audience comprising students, staff, and journalists in the Hong Kong Theatre.
Mr Bailey began with an overview of the economic and geopolitical shocks to the UK over the past few years: “. . .the change in our trading relationship with the European Union, the COVID pandemic with shutdowns of some sectors of the economy and supply chain bottlenecks in others, and the rise in energy prices caused by Russia’s brutal war on Ukraine and its people [. . .] They have all eroded the terms on which we trade with the outside world. This has made us poorer as a country.”
The link between these shocks and recent inflationary pressure on the domestic and global economy was a running concern throughout, as well as the effects of subsequent hikes in interest rates. A sustainable return to the two per cent inflation target was outlined as a top priority for the Monetary Policy Committee and the Bank.
Within the speech, Mr Bailey specifically focused on the UK, tracing the path of major economic indicators over the past few decades in the country. He stressed the significance of supply-side dynamics in particular, with an in-depth focus on two factors, “a slowdown in productivity growth and population ageing across advanced economies”.
He also briefly touched upon the rise of artificial intelligence and the implications of rapid technological advancement, even going on to quote OpenAI’s ChatGPT in his address.
Looking ahead, Mr Bailey warned of the impact of recent stress on the international banking system and fluctuations in inflation trends, but was optimistic about inflation easing as the year progresses,. He said, “we believe the UK banking system is resilient, with robust capital and liquidity positions, and well placed to support the economy.”
The event was widely covered by the news media, including by the Guardian, the Financial Times, Sky News, City AM, and Reuters.
For a complete transcript of Andrew Bailey’s speech, please visit the Bank of England website.