, if we failed to restrain excessive credit expansion and maintain price stability, it is likely to have a serious impact on maintaining financial system stability. we should also be mindful of the fact that an attempt to ensure financial system stability through an injection of high - powered money could greatly endanger the achievement of price stability. mr. volcker, former chairman of the fed reserve bank of usa has once said that “ the truly unique power of a central bank is the power to create money, and ultimately the power to create is the power to destroy ”. designers of central banks have well recognized the danger of this power. they have ensured that this power be exercised diligently by assigning the responsibility of maintaining price stability to central banks. i hope that you will have a chance to deliberate these developments, concerns and challengers during your sessions today and tomorrow. i wish all of you a very fruitful learning experience. thank you.

their initial impact may have resembled a leftward shift in supply ( chart 8a ) – but in time these hits to real income also take their toll on demand, shifting the ad line to the left as well ( chart 8b ). charts 8a and 8b : the shocks hitting the uk have pushed up inflation and started to weigh on demand that hasn ’ t happened to any appreciable extent so far. households emerged from the pandemic with extremely high rates of saving : having been so suppressed during the lockdowns, consumer spending had ample room to bounce back when they were lifted ( even without any subsequent growth in income ). those high saving rates had resulted in the accumulation of significant “ excess deposits ” : measured relative to household incomes, they were around 15 % higher than before the pandemic ( chart 9 ). wider measures of households ’ financial wealth had also recovered strongly, along with global equity markets, and those too were comfortably above average. all this provided the support for a very steep decline in the rate of saving ( i. e. for consumption to grow much faster than income ) once the economy came out of the lockdowns. bank of england chart 9 : “ excess deposits ” have fallen only slightly but households ’ overall financial wealth is down sharply household financial wealth relative to disposable income household m4 ( lhs ) net financial wealth ( rhs ) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2022 q3 data points are estimated. sources : bank of england, ons and bank calculations. but to varying degrees these cushions have since been eroded. the saving rate has fallen sharply and is now around a percentage point below its long - term, pre - covid average. most of the excess deposits remain, it seems. but one might ask why they do – why, at a time of significant reported pressure on household finances ( when consumer confidence has been setting new record lows ), more of them haven ’ t been spent – and therefore whether it ’ s realistic to think that they will be in the near future. as many have pointed out, these deposits are probably skewed towards the upper end of the income distribution ( and therefore away from those for whom rises in energy prices are the most burdensome ). it ’ s also worth recognising that other household assets have been weakening sharply this year. despite higher deposits, households ’ overall net financial wealth is quite a bit lower than before the