As feared by one distinguished economist of an earlier generation, “every business venture [risks being] transformed into a speculation on monetary policy”.4 In those circumstances, it may well have seemed reasonable to assume that recent inflation outturns were a good basis for guessing the near-term path of inflation. And given the evidence, firms and households could also have been forgiven for acting on an assumption that the authorities would be slow to respond to excess demand and so to upward pressures on inflation. By contrast, the current regime seems, so far at least, to enjoy high credibility. In consequence, when setting prices, firms might well place more weight on policy delivering inflation in line with the target than on recent inflation outturns. If so, that might be part of the explanation for the much lower persistence in inflation I described earlier. In other words, when shocks to the economy cause inflation to deviate from target, firms may nevertheless set prices on the basis that it will return to target fairly quickly – which would, of course, itself help to bring inflation back to target. In a similar  3  Tucker P. M. W. (2004), ‘Risk, Uncertainty and Monetary Policy Regimes’, Bank of England Quarterly Bulletin, Spring 2004, pages 84-96. 4  Simons, H. (1947),’Rules versus authorities in monetary policy’, in A Positive Program for Laissez-Faire and Other Essays, Chicago. 2  BIS Review 16/2005  vein, firms and households might now expect the Bank to tweak policy fairly promptly in response to shifts in demand.

But it is foundational: were it not to be of sufficient size or usability, that would quickly make headlines at times of financial stress. 1  Gender diversity in central banking was discussed at the excellent recent conference that the Bank, together with the Federal Reserve and the European Central Bank, hosted on Gender and Career Progression: https://www.bankofengland.co.uk/events/2018/may/gender-and-career-progression, while the Treasury’s Women in Finance Charter encourages gender diversity in the financial industry more generally: https://www.gov.uk/government/publications/women-in-financecharter. Of course, gender is just one important element in the broader drive to improve diversity in the economics profession. 2 For more information on the SM&CR, see Allen, T. (2018), “Strengthening the link between seniority and accountability: the Senior Managers and Certification Regime”, Bank of England Quarterly Bulletin, 2018Q2, available at https://www.bankofengland.co.uk//media/boe/files/quarterly-bulletin/2018/senior-managers-certification-regime. 3 These include: responsibility for management of the Bank’s capital and the Bank’s funding and liquidity operations; responsibility for the Bank’s treasury management functions; responsibility for the Bank’s proprietary trading activities; responsibility for the protection of clients’ assets. 2  All speeches are available online at www.bankofengland.co.uk/speeches  2  In my remarks today I want to account for how we’ve got to where we are and what the balance sheet of today is used for. I’ll then give some pointers on where it might go, drawing on a discussion paper we published in August 2018. And I’ll conclude with some remarks on the current policy environment, which the balance sheet is supporting.