. a significant problem is that financial cycles may have a much lower frequency than normal business cycles so incorporating them into a usual two or three year horizon for policymaking is difficult. bis central bankers ’ speeches rather, we have to keep both sets of objectives in mind. we will have to accept the occasional need to make a judgement about short - term trade - offs, but that is the nature of policymaking. and in any event, over the long run price stability and financial stability surely cannot be in conflict. to the extent that they have not managed to coexist properly within the frameworks in use, that has been, in my judgement, in no small measure because the policy time horizon was too short, and perhaps also because people became too ambitious about fine - tuning. we also must, of course, heed the lesson that, whatever the framework, the practice of financial supervision matters a great deal. speaking of supervisory tools, these days it is, of course, considered correct to mention that there are other means of “ leaning against the wind ” of financial cycles, in the form of the grandly - labelled “ macroprudential tools ”. such measures used to be more plainly labelled “ regulation ”. they may be useful in some instances when applied in a complementary way to monetary policy, where the interest rate that seems appropriate for overall macroeconomic circumstances is nonetheless associated with excessive borrowing in some sector or other. in such a case it may be sensible to implement a sector - specific measure – using a loan to value ratio constraint or a capital requirement. ( this is entirely separate to the case for higher capital in lending institutions in general ). we need, however, to approach such measures with our eyes open. macroprudential tools will have their place. but if the problem is fundamentally one of interest rates being too low for a protracted period, history suggests that the efforts of regulators to constrain balance - sheet growth will ultimately not work. if the incentive to borrow is powerful and persistent enough, people will find a way to do it, even if that means the associated activity migrating beyond the regulatory perimeter. so in the new - found, or perhaps re - learned, enthusiasm for such tools, let us be realists. the limits of central banking that policy measures of any kind have their limitations is a theme with broader applications, especially for central banks. the central banks of major countries were certainly quite innovative in their responses to the unfolding crisis. 9 numerous programs

bring inflation back down to target, so as to reduce the uncertainties facing households and allow firms to plan for the future. achieving price stability serves as an anchor for wider macroeconomic stability and prosperity. the institutional framework for monetary policy – an independent central bank held to account for its pursuit of an explicit inflation target – is in place. for the first time in its twenty - five year history, that framework is being put to the test in an inflationary global environment. we have to meet that test successfully. acting to achieve the 2 % inflation target is now more important than ever. in the mpc, we have both the tools we need and the resolve it will take to restore price stability. even in the face of current challenges, i am confident that we will succeed. drivers of today ’ s elevated inflation if that commitment is as strong as i claim, it begs the question of how we have ended up in the current situation, with inflation so uncomfortably high. answering that question requires we delve a little further into recent economic developments – peeling another layer from the onion. the character of external shocks in large part, recent price developments have been driven by a succession of unanticipated external disturbances to the uk economy – among others, the covid - 19 pandemic and its aftermath, and the russian invasion of ukraine. in the jargon of economics, we label this ‘ a sequence of adverse external shocks ’. four features of these disturbances are worth emphasising. first, they were genuine ‘ shocks ’ in a specific, technical sense : they were not ( and could not have been ) anticipated. second, they have transmitted into uk inflation relatively quickly. for simplicity, i ’ ll focus for a moment on the impact of higher international oil and gas prices on uk consumer price inflation. the direct implications of these external shocks for uk price developments transmits within a matter of months. even with the added complications implied by the ofgem price cap, higher european wholesale gas prices entered uk utility prices – and thus uk cpi inflation – within six months. moreover, many of the subsequent indirect implications of higher international energy prices – that is, their impact on a wider set of uk goods and services prices, via ( say ) higher transport or utility costs – are already also being felt. these indirect effects account for part of the widening incidence of above target inflation developments across a broad set of core goods and services components of the overall index. third, these shocks have been large. again