There are several reasons, some, but not all, of them having to do with composition effects in the basket of consumption goods and in employment that may be associated with an older population. First, the consumption basket of young adults includes a higher proportion of expenditure on durable goods and services than that of the older age groups, whose consumption basket includes higher expenditure on non-durable goods and lower expenditure on services, as many of the services they consume are non-market services. Thus population ageing might prompt changes in the relative demand for goods and services. If higher demand is concentrated on goods and services with lower price growth, population ageing would put a certain degree of downward pressure on inflation. Secondly, population ageing tends to increase inflation aversion, insofar as older people who have accumulated more wealth, and are therefore generally net creditors, are more averse to inflation. Thirdly, composition effects in consumption could give rise to changes in the sectoral and occupational composition of employment, increasing the share of employment both in low and highly-skilled occupations and reducing it in medium-skilled occupations, as this is the skills’ pattern required to produce the goods and services in growing demand. Accordingly, demographics could also accelerate the trend towards the polarisation of employment that has been observed since the early 1990s and is usually attributed to technological advances resulting from the automation of routine tasks. Polarisation and the increasing share of low-skill occupations in services may tend to reduce wage pressures.

Second, the circumstances in which the regime would be triggered should be spelt out as clearly as possible. It is unrealistic to imagine that entry to the regime could be triggered by reference to quantitative triggers alone. Some discretion will be necessary. But the triggers should contain some quantifiable measures for both capital and liquidity, and there should be transparency in advance about their formulation to constrain the authorities’ discretion. Moreover, looking ahead, although the regulator should have the leading role in triggering the regime, no regulator, however effectively managed, can ever fully insulate itself against the risk of forbearance which might delay a necessary resolution. That is why the Bank believes that the resolution authority, wherever it is located, should have a powerful voice in decisions on the use of the trigger. Moreover, any resolution authority will have a natural interest in the timing of a decision to place a bank under its control. Third, a clear framework for accountability should be established to give confidence that decisions relating to the resolution regime are exercised in line with the objectives for the regime set out in legislation. 2  BIS Review 75/2008  Turning to deposit insurance, I understand the concerns that many of you have voiced about the reforms discussed in the tripartite Consultation Document. I know that you accept that to avoid bank runs there will need to be 100% insurance of deposits – up to a limit. That limit should not be too high.