The UK authorities have announced a work programme to scan the horizon for potential market or private sector co-ordination failures that may be damaging the fairness or effectiveness of FICC markets. 15  The authorities will seek to catalyse reforms to insure that market structures that are vulnerable to manipulation and misconduct do not develop over time. Conclusion  The examples above show how the UK has put in place a set of reforms to improve standards and ethics in financial markets. We have not tried to regulate culture, but we have used a combination of hard law and soft law to raise expectations and norms. It will take time to move from ‘ethical drift’ to ‘ethical lift’. Better regulation is part of the solution, but so is a more effective partnership between the official and private sectors to improve market practices and conduct norms. 14 15  The FX Global Code: May 2016 Update can be found at: https://www.bis.org/mktc/fxwg/gc_may16.pdf See FEMR Implementation Report at: http://www.bankofengland.co.uk/markets/Documents/femr/implementationreport.pdf 7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7  References Angeli, Marilena and Gitay, Shahzad (2015), ‘Bonus regulation: aligning reward with risk in the banking sector.’ Bank of England Quarterly Bulletin, 2015 Q4, Volume 55, No. 4, available at: http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2015/q4.pdf. Bank of England, ‘Senior Managers Regime’, http://www.bankofengland.co.uk/about/Documents/smr.pdf Bank for International Settlements – the Foreign Exchange Working Group (2016), ‘The FX Global Code: May 2016 Update’, https://www.bis.org/mktc/fxwg/gc_may16.pdf Cullen, Jay (2016), ‘A Culture Beyond Repair? The Nexus between Ethics and Sanctions’, Just Financial Markets, Oxford University Press, ed. Herzog.

When housing prices fall at a later stage, inflation will therefore undershoot the target substantially and unemployment will be far above its long-run equilibrium level. All in all, target attainment will therefore not be very good. The second alternative, as represented by the red line, entails a less expansionary policy that lets it take a little longer to return to the inflation target and reduces unemployment more slowly – and in the short-term perspective therefore leads to poorer target attainment. However, this policy also means that one avoids debt becoming excessively high and housing prices accelerating out of control. One thus also avoids the turbulence that arises from a subsequent fall in housing prices and target attainment is better in a longer-term perspective. This policy is usually described as monetary policy "leaning against the wind". It should be emphasised that this is of course an exaggerated and highly stylised example aimed at proving a point of principle. In reality, the deliberations we have to make are much more complex.9 Monetary policy is not a question of choosing between two alternatives that  6  Large debt levels can entail problems even if housing prices do not fall, as households become more sensitive to interest rate changes. See, for instance, the analysis on the discretionary income calculations in Financial Stability Report 2013:1, Sveriges Riksbank. 7  See, for example, Mian and Sufi (2011).