One question that has been raised in the debate is whether it is too late to cut the rate now, given the economic recovery. This is not the decisive issue for us. Our method of working means that we base our decisions on inflation forecasts. These show that there is scope to cut the rate. In the short term, inflation is expected to be much lower than 2 per cent and to cautiously approach the target level only 1-2 years from now. It would therefore appear that there is plenty of time for an upward adjustment of the interest rate in the future if our forecasts indicate this is necessary. The situation would be different if there was reason to expect a rapid economic upturn now, which could threaten fulfilment of the inflation target in the shorter term. A cut in the interest rate can perhaps also be regarded as an insurance against weaker growth in demand; although we have assumed a clear improvement in economic activity, this is not guaranteed. Finally, I should like to comment on an element in the present discussions on monetary policy. Many debators have shown a tendency to argue as though it were possible to conduct a perfect, fine-tuning policy. I believe it is almost impossible. I think that it is always possible to claim with hindsight that a little bit more or a little bit less could have been achieved either earlier or later.

And as a purely non-traded good, housing isn’t affected as directly as business capital by the prospective changes in the UK’s terms of trade. So any impact of greater uncertainty may on this occasion take longer to come through. But I fear I’m already straying into the temptation I’ve warned against, to over-interpret incoming data. The wiser course is to wait for the November Inflation Report, which gives us a good opportunity to reflect more systematically on the news since August, and what it implies – if anything – for the medium-term outlook. Thank you. 13  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  13  References Bank of England, 2016, August 2016 Inflation Report, http://www.bankofengland.co.uk/publications/Documents/inflationreport/2016/aug.pdf Bank of England, 2012, “The distributional effects of asset purchases”, Quarterly Bulletin, 2012 Q3, http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb1203.pdf Bean, C., 2012, “Pension funds and quantitative easing”, speech given to the National Association of Pension Funds’ Local Authority Conference, http://www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2012/speech573.pdf Bernanke, B., 2015, “Why are interest rates so low?”, Brookings, https://www.brookings.edu/blog/benbernanke/2015/03/30/why-are-interest-rates-so-low/ Bloom, N., 2009, ‘The impact of uncertainty shocks’, Econometrica Broadbent, B., 2013, ‘Forecast errors’, Speech given at The Mile End Group of Queen Mary, University of London Broadbent, B., 2014, “Monetary policy, asset prices and distribution”, speech given at the Society of Business Economists Annual Conference, http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech770.pdf Dixit, A. and R.S. Pindyck, 1994, “Investment Under Uncertainty”, Princeton University Press Haddow, A., C. Hare, J. Hooley and T. Shakir, 2013, ‘Macroeconomic uncertainty: what is it, how can we measure it and why does it matter?’, Bank of England Quarterly Bulletin.