what a difference a decade makes mark carney governor of the bank of england chair of the financial stability board remarks at the institute of international finance ’ s washington policy summit, the reagan centre, washington dc 20 april 2017 i am grateful to alice carr, wayne chapman, carsten jung and iain de weymarn for their assistance in preparing these remarks. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx introduction it ’ s a pleasure to be back at the iif ’ s washington policy summit. last time i spoke here ( in 2011 ) it was still early in the international financial reform process. from the iif ’ s perspective at the time, there were three major concerns : - the consistency of implementation across the g20 ; - the possibility of significant regulatory arbitrage in shadow banking ; and - whether the fsb / g20 ’ s ambitious agenda would impair the recovery. today, those debates have largely been settled. first, the new international minimum standards are being, by and large, consistently and promptly implemented in g20 jurisdictions. this progress is regularly assessed and transparently reported by the fsb and the imf. and in general, when countries have deviated from international standards, it ’ s because they have chosen to go further. second, activities which give rise to similar risks are being treated consistently regardless of where they originate. a series of measures have addressed the major regulatory arbitrage opportunities that encouraged shadow banking. contingent exposures of banks have been brought on balance sheet and appropriately capitalised. more generally, shadow banking is being replaced with market - based finance that adds diversification, competition and resilience to the system. as for the macroeconomic impacts, it has been apparent for some time that having well - capitalised, liquid banks is a pre - requisite — rather than an impediment — to growth. in those economies where reform has moved the quickest, the recoveries have been the most robust. indeed, the broader benefits of reforms are now being realised as the global financial system moves from fragility to resilience. credit is now growing in all major economies. the cost of financing has remained low. sources of finance are increasingly diversified between banks and markets. and the system is demonstrating an ability to dampen shocks rather than amplify them. the biggest question now is how to best take advantage of these years of hard work

‘ transitory ” does not mean ‘ here today, gone tomorrow ’. i learnt recently for instance that some businesses are bringing forwards their shipping arrangements for christmas stock. that will put further pressure on global capacity, extending an increase in shipping costs that started in late 2020 and had already exceeded my expectations, meaning that the current increase in shipping costs could have an impact on consumer prices at least until the end of the year. i also agree with the committee ’ s assessment in june that there are now “ two - sided risks ” around that central path, for both gdp and inflation. indeed for me that updated assessment is one of the most significant implications of developments since may, when the mpc still judged the risks to gdp to be skewed all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice to the downside in the near term. for that reason i want to spend some time setting out what i see as the key risks and how they might evolve – a survey, if you like, of what new features future editions of our map of the economy might need to incorporate. two sided risks i should say right away that the downside risks to gdp and inflation from covid remain clear and present. although the uk ’ s vaccination programme has proved successful, the pandemic in the uk and the wider world is not yet over. it remains to be seen what the full impact of the new delta variant will be and how households and businesses respond to the combination of the current rise in infection rates and the impending lifting of remaining restrictions. starting with my first consideration, whether recent strength proves persistent or temporary. even absent a further impact from covid, it is unlikely that the current pace of gdp growth can be sustained for much longer. indeed if current strength represents a bringing - forward of the recovery that we had expected later in the year, then subsequent growth might if anything be expected to be weaker rather than stronger. the very latest indicators suggest the pace of underlying demand growth may indeed be slightly moderating, though as i mentioned previously the read from the latest gdp data itself is clouded by supply constraints. but there are certainly upside risks to household spending, if consumer confidence continues to rise or if households run down their accumulated aggregate savings faster than we have assumed. the current strength in the housing market is suggestive in this regard, both as a potential indicator of household confidence and due to the consumption of