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mpc: 5 months to August. Allowing for month-to-month volatility, the AEI series had been edging upwards in recent months. If the difference was a good guide to wage drift, it was possible that the recent rise in nominal earnings would be consolidated in forthcoming settlements. A survey by Industrial Relations Services pointed in the opposite direction, however. In its latest survey, 43% of respondents had expected to make lower settlements than last year, 46% the same, and 11% higher. Last year, only 23% had expected lower settlements than the previous year, and 26% had expected higher. It was suggested that the apparent fall in expected settlements this year might reflect the low recent RPI outturns (1.1% in August and September) and expectations that RPIX would remain below the 2½% target for a while. Anecdotal evidence on this, based partly on Committee members' own regional visits, varied. There were suggestions both that RPI was the starting point in negotiations, and that the benchmark was the higher of RPI or RPIX. Some employers had suggested that the recent outturn of around 1% was not a feasible starting point; before allowing for productivity improvements, it was easier to argue either for zero if necessary on the basis of a particular company's circumstances, or alternatively for 2½% reflecting the inflation target and so medium-term inflation expectations. The Committee noted that there would not be much hard data on settlements until the new year, although the Bank's regional Agents would monitor, through their contacts, the emerging evidence. 17 Whatever the position, it was possible that settlements - both backward-looking data and forward-looking surveys - were now less reliable indicators of labour market conditions given the decline in collective bargaining, and the increase in personalised remuneration, over recent years. If so, relatively more weight needed to be placed on the path of broader measures of earnings. 18 The Committee as a whole agreed that its assessment of labour market conditions was highly uncertain. Structural changes and the new monetary regime meant that behaviour may have changed, but it was impossible to know by how much. Looking forward, the quantity data, particularly the LFS series, would be important indicators of whether there were any further tightening, and possibly of its speed. But what mattered was the extent of pressure on labour supply, for which there was no direct measure, and the extent to which this was translated into nominal earnings growth and settlements.

Prices and costs

19 The main issue concerning prices was the prospective effect on the aggregate price level, and thus on measured inflation in the short-to-medium term, of various expected developments. In particular, the Committee had made allowance in its Inflation Report projections for falls in price-cost margins