The dismal decade

Earlier today, the Governor of the Bank of England, Andrew Bailey, gave a speech at the Resolution Foundation outlining the nature of the Covid-19 crisis and the challenge that it poses for monetary policy. But as his speech progressed, it became clear that the Bank faces a much larger challenge. Covid-19 hit the UK economy at the end of a dismal decade. Returning to "where we were" before the pandemic won't be good enough. Just how dismal the 2010s were is evident in this chart from Andrew Sentance: Even before Covid-19 struck, average GDP growth was well below its historical average and heading downwards. The 2010s were, to put it bluntly, a decade of stagnation. The 2000s were slightly worse, but that was because they included the deep recession after the financial crisis, during which the economy shrank by 6%. For the 2010s, there was no such excuse. So Covid-19 hit an already under-performing economy. As a result, Sentance's forecast for the 2020s is frankly