Are the MPC’s new forecasts plausible?

There have been suggestions in some quarters that the MPC’s new forecasts for strong growth, low unemployment and below-target inflation push the envelope of plausibility.

However, the MPC is certainly not forecasting an unprecedented combination of economic conditions. What’s more, its forecasts are still based on only a very modest pick-up in productivity growth. Given past experience, there would appear to be scope for a stronger recovery in productivity that helps the UK experience another few years of strong growth and low inflation.