In the 15 months since my last report to the Treasury Committee in November 2024, monetary policy has had to navigate an increase in headline inflation against the backdrop of continuing underlying disinflation. To ensure a sustainable return of inflation to the 2% target, monetary policy has been set to balance, on the one hand, upside risk to inflation from lingering persistence in domestic inflationary pressures stemming from the big inflationary shocks of recent years, and downside risks to inflation from subdued economic growth and a weakening labour market on the other. Gradual progress on underlying ... (full story)