Ben Broadbent discusses the economic costs of restricting trade. The pandemic and the war in Ukraine provide a stark illustration of the impact of a sudden contraction in the supply of imported goods for an open economy like the UK. He argues that in 2021 and 2022 these shocks reduced real national income significantly and contributed to the rise in domestic inflation. He explains that although import costs have been declining in recent months, it is likely that monetary policy will have to remain in restrictive territory for some time.
Speech
Introduction and summary
Good morning. I haven’t been to this conference for a number of years and it’s a great pleasure to be back.
Quite a bit has happened in the interim. We have been through a terrible pandemic. Just as the world was overcoming the worst of Covid-19, Russia invaded Ukraine. We are now witnessing the most serious armed conflict on the European continent since the Second World War.
These events have taken a terrible human toll. They’ve also had significant impacts on the world economy.
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