As well as reducing economic activity sharply over the last year, the pandemic has also had large effects on the economy’s potential output. 1 In this speech, I want to discuss some issues in measuring potential output and the amount of spare capacity in the economy at present, and some risks around the outlook for supply and demand.2 I will then turn to some considerations for monetary policy. I will make several main points. • The pandemic and associated restrictions have significantly reduced potential output over recent quarters, but the majority of these effects are likely to be fairly temporary. • I put more ... (full story)