but limited deterioration in growth. the threat of a strengthening feedback loop from a contracting banking sector to a severe downturn in the real economy had not disappeared but did not seem the central case. but the risks and the challenges changed dramatically in the autumn. first, the losses incurred by investors in the rescues of fannie and freddie combined with the decision to allow lehman brothers to go into administration, led to a dramatic loss of confidence in financial markets ( chart 5 ) threatening a savage further twist in the squeeze on credit for households and companies. second, we saw a sharp weakening in oil prices ( chart 6 ), with the odds implied by options of such a fall less than 1 %. other commodity prices also fell. and, even before that was reflected in consumer prices, the public ’ s inflation expectations turned down decisively. in short, the balance of risks between inflation being above or below target in the medium term shifted decisively to the downside. that was the background to the internationally coordinated reductions in interest rates in early october and the aggressive cut of 150 basis points in bank rate in november, the largest reduction in official interest rates since 1992 ( indeed i believe it was only the third time bank rate had been cut by 150bp since the bank was founded over 300 years ago ). even so, our latest medium term projections for inflation show inflation remaining below target in the medium term and suggest further reductions may be necessary ( chart 7 ). of course, there are large uncertainties around that projection ; more so than usual. in particular, they take no account of any fiscal measures that the government may announce next week. just as we had to change gears on monetary policy, so we needed to change our approach to the banking sector. the tripartite authorities – the bank, fsa and treasury – were criticised for the handling of northern rock and for being slow off the mark when the crisis started in 2007. but we learned from that experience. we have established new ways of providing the market with the liquidity that it needs. and, as the crisis has widened, we have dealt with vulnerable and failing banks, such as bradford and bingley, more speedily and cleanly. but as the crisis deepened in late september, it became clear that we needed more than a case by case approach here to tackle the continuing loss of confidence in the banking system in the uk, in euro area and in the us. on 8 october therefore we announced a comprehensive package of measures including support for

retail payments board, in turn, is promoting the introduction of paneuropean instant payment solutions. technological advances and the entry into the market of new actors and practices are also a challenge to regulation. it is important to strike a balance : on the one hand regulation must ensure the reliability and safety of payment services, but on the other hand, it must also enable the introduction of new innovations. in finland, many important payment - related projects are under way, such as utilising the data content of electronic invoices, bank statement information and information contained in purchase transactions, and also the construction of an income register. the projects may, if successful, bring significant benefits and cost savings to consumers, businesses, financial service providers and also to the public sector. reliable and secure payment systems are vital for the financial system and the functioning of society as a whole. reliable, secure and efficient payment services that openly and extensively utilise the opportunities of digitalisation may also help stimulate productivity growth in the economy. bis central bankers ’ speeches