The Changing Pattern of Savings: Implications for Growth and Inflation

Abstract

In this speech, Andrew Sentance, a member of the Monetary Policy Committee, discusses the role that savings play in the economy, the changing pattern of savings over the past decade and the implications of these trends for monetary policy. In the United Kingdom, a falling personal savings rate has supported strong consumption growth since the mid-1990s. This has been partly offset by healthy corporate saving — a development common to many countries. Significant imbalances in the distribution of savings and investment across the global economy have also emerged, which lie behind the pattern of current account surpluses and deficits. Looking ahead, these developments point to the need for a rebalancing of demand growth both at home and abroad. In the United Kingdom, a sustained recovery in investment would need to be offset by consumption growth if demand pressures are to be kept in check.