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mpc: 7 higher incomes: that was assumed in the central projection. Others believed that settlements had a bigger impact than earnings growth on prices, and that unmeasured productivity improvements would help to offset rapid earnings growth. They preferred an assumption that the recent spike up in earnings growth would have a smaller effect on prices than had been assumed in the central projection. 25 The Labour Force Survey measure of employment had increased by 59,000 (0.2%) in the three months to February, in line with recent quarters. The number of people unemployed had fallen slightly. Evidence from surveys and the Bank's regional Agents suggested that skill shortages remained a concern, but had perhaps stabilised. 26 Overall the labour market remained tight. While it was not obviously tightening further, there was not much evidence of conditions easing.

Prices and costs

27 RPIX inflation was 2.0% in March, with the fall of 0.2 percentage points on the month being slightly larger than expected. There continued to be a large divergence between goods price inflation, which at -0.2% was the lowest on record; and services inflation, which had remained at 4.2%. 28 Some members did not think that the size of the sectoral divergence was significant for the overall inflation outlook, although it was an unwelcome sign of imbalances in the economy. Overall, the Committee agreed that there was little if any news in the latest data relevant to the outlook. 29 In terms of the outlook for prices, an important consideration was the impact of any supply side changes in the economy. The Committee decided to retain in its central projection February's assumptions about structural pressures on domestic margins (and the latest projections had also incorporated a downward adjustment to margins on imports). Also as in February, some members preferred to assume a smaller effect, and some preferred a larger effect. In addition, some members preferred to assume that trend productivity in the UK would rise towards the levels achieved in the US, which would reduce the rate of increase in prices for any given rate of earnings growth.