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mpc: 22 A key question was whether the current low level of CPI inflation reflected underlying changes in the economy or the effect of temporary factors. One possible underlying change was a more rapid rate of growth of potential supply in recent years than the Committee had previously assumed, perhaps as a result of productivity gains from information, communications and technology investment. If so, domestic capacity pressures might be weaker than currently thought. Productivity gains in retailing and distribution might have been one reason why cost and price rises in the supply chain had not been passed through fully to the consumer, and there might be scope for further such gains. A second possible change to the structure of the economy might arise from a changed relationship between wage growth and unemployment, as discussed in paragraph 19. A third might be that CPI inflation had become less responsive in the short term to changes in economic activity.

The November GDP growth and inflation projections