The broad picture shown in our latest forecast is for a continuation of sustained non-inflationary output growth. Economic activity has clearly slowed in recent months, and the UK economy is beginning to be affected by developments in the United States and elsewhere. But a number of temporary factors that have acted to restrain activity should come to an end over the course of this year, and recent and prospective fiscal and monetary policy changes are likely to support activity over the next two years. We expect to see a continuation of the recent pick-up in labour productivity, which should help to contain cost pressures even if the rate of growth of average earnings rises back to around 5 per cent. Inflationary pressures are thus expected to remain quiescent unless the level of sterling falls more rapidly than presently seems likely.