is on the pricing side, as prices have been higher relative to costs than expected. that could indicate that the margin of spare capacity is not as large as the collapse in activity might suggest. on current estimates, output is presently about 10 % below a continuation of its pre - crisis trend. but historical experience indicates that the output losses – relative to the pre - crisis trend – after banking crises tend to be highly persistent. that suggests that such see pages 48 – 49 of our august 2010 inflation report for more on this. crises are associated with an impairment of supply capacity too. business surveys are consistent with this, implying that the margin of spare capacity in firms is now relatively limited – in fact not much larger than after the bursting of the dotcom bubble. but against that, it is difficult to find any direct evidence of supply impairment. for instance, liquidations have been running at less than 1 % ( compared to 3 % in the 1990s recession ). one resolution of the puzzle may be that producers have mothballed capacity, which could, at a cost, be brought into use if demand conditions warranted. the mpc ’ s view is that the current elevated level of inflation is likely to persist in the near term – indeed our central expectation for inflation is somewhat higher than that of outside commentators. ultimately, however, this period of elevated inflation should prove temporary. the standard rate of vat is set to rise again at the beginning of next year, but once that drops out of the annual comparison a year later, so the inflation rate is likely to fall back sharply. the impact on prices of sterling ’ s past depreciation should be starting to wane. and the relatively moderate expansion that we expect over the next year or two should ensure that there is some, albeit uncertain, brake on inflation from spare capacity. we have seen muted underlying inflation pressures in both the euro area and the united states, reflecting the spare capacity in those economies, and there is no reason to believe that the united kingdom will behave differently once the temporary influences subside. but there are risks to this scenario. they are twofold. first, that strong global growth continues to generate upward pressure on the prices of commodities and tradable goods more generally. and, second, that the period of elevated inflation causes medium - term inflation expectations to drift up, leading to higher rates of increase of both wages and prices. measures of near - term household inflations have moved up in line with the mpc ’ s

xxxi adolfo beria di argentine symposium la banca nel nuovo ordinamento europeo : luci e ombre ideas for the future of italy ’ s financial system salvatore rossi senior deputy governor of the bank of italy and president of ivass courmayeur, 23 september 2017 contents italy ’ s banks in the new european system the problems besetting the ‘ business of banking ’ today the transition of the italian financial system the rules are changing technology and its uses are changing the system ’ s transition italy ’ s banks in the new european system italy ’ s economy was already weak when the 2007 - 08 global financial crisis struck. its productive system was structurally incapable of delivering innovation, efficiency and genuine development ; its financial system was overly reliant on banks. the old dinosaur that was its banking system had already begun to stir back to life, but many banks lagged behind as a result of ingrained bad habits in governance and management. these weaknesses fed on each other and were decried at conferences and publicly condemned. given that they were also deeply rooted in the country and its history, at least its recent history, a solution appeared remote. if you get a raging temperature when already under the weather, you run a serious risk, as italy did in these years. the country is only now coming round and while not yet decisive, the signs are encouraging. what happened outside our borders in recent years – worldwide efforts to draw up new regulations for finance, banking union in europe and its first faltering steps – will be analysed by future historians. 1 europe ’ s banking union is here and we must ensure it functions smoothly, starting with the single supervisory system ( ssm ) and the single resolution mechanism ( srm ) established in frankfurt and brussels. i will return to this point shortly. for an overview of these events from italy ’ s perspective, see i. visco, speech at the 23rd assiom forex congress, modena, 28 january 2017 ; s. rossi, ‘ the banking union in the european integration process ’, delivered at the conference on european banking union and bank / firm relationships, cuoa business school, altavilla vicentina, 7 april 2016. from a legal perspective, banking union formally rests on numerous and complex legislative acts, which i will refer to using their english acronyms. for the euro area only, there are the two ssmr and srmr regulations establishing the new bodies tasked with supervision and banking resolution