implied inflation tail risk, 5 - years ahead measured at the 95th percentile. inflation is the tiger whose tail central banks control. this tiger has been stirred by the extraordinary events and policy actions of the past 12 months. it is possible that, as vaccinations are rolled out and some degree of normality returns, inflation will return to a stable state of rest. indeed, if risks from the virus or elsewhere prove more persistent than expected, disinflationary forces could return. but, for me, there is a tangible risk inflation proves more difficult to tame, requiring monetary policymakers to act more assertively than is currently priced into financial markets. people are right to caution about the risks of central banks acting too conservatively by tightening policy prematurely. but, for me, the greater risk at present is of central bank complacency allowing the inflationary ( big ) cat out of the bag. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice references batini, n and haldane, a g, ( 1999 ), ‘ forward - looking rules for monetary policy ’ in jb taylor ( ed ) monetary policy rules, chicago : university of chicago press broadbent, b ( 2021 ), ‘ covid and the composition of spending ’, speech available here. evans, c, fisher, j, gourio, f and krane, s ( 2015 ), ‘ risk management for monetary policy near the zero lower bound ’, brookings papers on economic activity, economic studies program, the brookings institution, vol. 46 ( 1 ) ( spring ), pages 141 - 219. fajgelbaum, p. and khandelwal, a ( 2016 ), ‘ measuring the unequal gains from trade ’, the quarterly journal of economics, 131 ( 3 ) : 1113 - 1180. friedman, m ( 1961 ) ‘ the demand for money ’, proceedings of the american philosophical society, jun. 27, 1961, vol. 105, no. 3, pp. 259 - 264. goodhart, c and pradhan, m ( 2020 ), ‘ the great demographic reversal : ageing societies, waning inequalities and an inflation revival ’, published by palgrave macmillan ; 1st ed. 2020. haldane, a ( 2018 ) ‘ pay power ’, speech given at acas future of work conference, available

emerging prudential lessons from the covid stress speech given by victoria saporta, executive director of prudential policy bank of england webinar 21 july 2021 many thanks to hannah burnett, damien lynch, katie low, aakriti mathur, matthew naylor, david murphy and aniruddha rajan for help in preparing this speech. and thanks also to andrew bailey, sarah breeden, david curry, ronnie driver, simon hall, paul hawkins, simon khong, paul nahai - williamson, alison scott, gareth truran and michelle uhrick for comments. errors and opinions are my own. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice good morning ladies and gentlemen. it ’ s a pleasure to be able to speak to you today on some emerging prudential lessons that i draw from our experience so far in managing the economic consequences of this terrible pandemic. i say “ so far ” because of course the tragic human consequences of the pandemic are ongoing, as is the economic fallout that followed it. and while we are not out of the woods yet, the progress made to date affords us space for reflection on how the prudential framework we put in place following the 2008 financial crisis has served us. and, to observe if there are parts of it that may not have worked as we expected. as the american philosopher and educational reformer john dewey said : “ we do not learn from experience … we learn from reflecting on experience ”. let me start by recalling the nature of the shock unleashed following the onset of the pandemic. context : the post - crisis reforms and the covid stress the turmoil caused by the covid - 19 global pandemic has been the toughest test of the financial system since the 2008 global financial crisis. in a few weeks in early 2020, levels of economic activity and expectations of future economic prospects fell dramatically. investors, corporates, banks and many households stockpiled cash and reduced their risk appetite. as a result, both risky asset prices and yields on safe assets fell ( chart 1 ), bank lending to businesses soared, as did provisions for expected credit losses. from seven moments in spring, speech, andrew hauser, june 2020. authorities took swift and decisive actions to stabilise the system and increase the supply of cash. these included measures to enhance the availability of bank funding and liquidity