24  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  24  References Aikman, D, Haldane, A, Hinterschweiger, M and Kapadia, S (2018), ‘Rethinking financial stability’, Bank of England working papers 712, Bank of England. Bailey, A (2020), ‘The central bank balance sheet as a policy tool: past, present and future’, speech available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/the-central-bank-balancesheetas-a-policy-tool-past-present-and-future-speech-by-andrew-bailey.pdf Bank of England (2021), ‘Responses to the Bank of England’s March 2020 Discussion Paper on CBDC’ available at https://www.bankofengland.co.uk/paper/2021/responses-to-the-bank-of-englands-march-2020discussion-paper-on-cbdc Bernanke, B (2004), ‘The Great Moderation’, Speech given at the meetings of the Eastern Economic Association, Washington, DC, February 20, 2004. Bholat, D, Broughton, N, Ter Meer, J and Walczak, E (2019), ‘Enhancing central bank communications using simple and relatable information’ Journal of Monetary Economics, Elsevier, vol. 108(C), pages 1-15. Botsman, R (2017), ‘Who Can You Trust? How Technology Brought Us Together – and Why It Could Drive Us Apart’, Portfolio Penguin. Briault, C, Haldane, A and King, M (1997), ‘Independence and Accountability’, Towards More Effective Monetary Policy, Palgrave Macmillan UK, p. 299-340. Coenen, G, Montes-Galdon, C and Smets, F (2020), ‘Effects of state-dependent forward guidance, largescale asset purchases and fiscal stimulus in a low interest rate environment’, CFS Working Paper No. 639. Evanoff, D D, Haldane, A and Kaufman, G C (ed) (2015), ‘The New International Financial System: Analyzing the Cumulative Impact of Regulatory Reform’ World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 9604, June Fischer, S. (1999), ‘On the Need for an International Lender of Last Resort’ The Journal of Economic Perspectives, 13(4), 85-104.

While the essentials of inflation-targeting are as strong as ever, the regime is being tested as never before. The Covid crisis has seen interest rates fall to their effective lower bound (ELB) and Quantitative Easing (QE) restarted on a scale that may yet match the decade-long period after the Global Financial Crisis. By the end of this year, the Bank will hold close to £ trillion of nominal Government assets, around half of their total and 40% of GDP. Other central banks find themselves in a similar spot. Truth be told, this is for me an uncomfortable spot. It is uncomfortable for two distinct but related reasons. The first, nearer-term, is discomfort at whether continuing monetary stimulus is consistent with central banks hitting their inflation targets on a sustainable basis. A second, more medium-term, discomfort is whether the monetary policy strategies being pursued by central banks are at risk of time-inconsistency, fiscal dominance and an erosion of central bank independence. The restrictions imposed as a result of the Covid crisis caused an extra-ordinarily large and sharp contraction in activity, almost without precedent. As these restrictions are lifted, we would expect an equally large and sharp recovery. That bounce-back is now well underway in the UK. Indeed, current data suggest it is occurring faster and sooner than expected, with the economy already within statistical spitting distance of its pre-Covid level. This rapid bounce-back has been quasi-automatic, as restrictions have eased, businesses have reopened and people have returned to working, shopping and socialising.