This diversification is bringing about an “unbundling” of financial activity – that is to say, breaking the financial services activity and value chain into its component pieces. The shift towards digital payments can enable competition and ultimately benefit consumers, and the Bank, given its role at the heart of the financial system, is in a unique position to support that. As the Governor said yesterday, this includes updating our own hard and soft infrastructure to provide a platform for private innovation to serve the digital economy. I’ll give three examples of what this means in practice. First, the Bank is renewing its Real Time Gross Settlement service (RTGS), the UK’s core payments infrastructure – Victoria Cleland, our Executive Director for Banking, Payments and Innovation, spoke about this at a roundtable discussion here yesterday. Our goal is to deliver a materially stronger, more resilient, flexible and innovative sterling settlement system, with the ability to support a diverse range of payment technologies such as those built on distributed ledger technology. 9  6  This project, led by Huw van Steenis, is looking at how financial services might evolve over the next decade, and what this means for individuals, businesses and financial service providers. For more information see the project webpage at https://www.bankofengland.co.uk/research/future-finance. 7 For more detail on the work of the Fintech Hub, see the article “Embracing the promise of fintech” in the Bank’s Q1 Quarterly Bulletin, available at https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2019/embracing-the-promise-of-fintech. 8 See WorldPay’s Global Guide to Alternative Payments, available at http://offers.worldpayglobal.com/rs/worldpay/images/worldpayalternative-payments-2nd-edition-report.pdf. 9 See https://www.bankofengland.co.uk/news/2018/march/rtgs-renewal-proof-of-concept and https://www.bankofengland.co.uk//media/boe/files/payments/a-blueprint-for-a-new-rtgs-service-for-the-uk.

Although hikes were seen in these indicators, which edged up again in  BIS central bankers’ speeches  3  November and December, the main trend of inflation remained in line with medium-term targets (Figure 7). Against this background, medium-term inflation expectations declined significantly (Figure 8). While near-term inflation expectations declined in a higher ratio compared to the previous quarter, the longer the maturities, the less was the decline in expectations. 12 and 24-month ahead inflation expectations remained above the figures implied by the targets for 2011 and 2012 year-ends, however, the difference went down slightly in the last quarter (Figure 9). 4  BIS central bankers’ speeches  2. Monetary policy response  After commenting briefly on inflation developments, I would now like to cover the policies pursued by the Central Bank during the last quarter. The second round of quantitative easing initiated in the last quarter of 2010 by some advanced economies and the attendant ramp up of capital inflows to emerging markets has required significant modifications to the CBRT’s strategy. Macroprudential measures were needed because short-term capital inflows have strengthened the divergence between domestic and foreign demand causing the current account deficit to widen rapidly. Since core inflation trends were in line with medium-term inflation targets, the monetary policy was able to focus on financial stability. The new monetary policy strategy envisions the use of multiple instruments to manage both internal and external balances.