really is an anchor in these challenging times. 1 / 8 bis - central bankers'speeches and these are not just empty words. in pursuit of its inflation target, the mpc has raised bank rate in each of its last seven meetings. it has brought qe to an end and started to run down its holdings of gilts accumulated for monetary policy purposes. and it has changed the nature of its communication. we have moved away from the forward guidance that signalled bank rate would remain floored at its effective lower bound that met me when joining the mpc last year. in its place, the mpc has emphasised that its policy decisions are driven by the evolution of the data, while signalling a willingness to respond more forcefully to signs of greater persistence in inflation, should that prove necessary. at every juncture, the mpc has remained committed to a medium - term view that stabilises inflation around the 2 % target. in that spirit, a couple of weeks ago i argued at a talk in london that the significant market reaction and economic implications of recent macro news – including recent fiscal policy news – was likely to prompt a significant monetary policy response at the mpc's next meeting on 3 november. of course, that rendezvous is still some time away. and, of course, much can happen in the intervening period, with markets exhibiting volatility and the geo - political and economic environment uncertain. anyway i can only speak for myself today, not for the nine - member committee as a whole. but as things stand, i stand by my london statement. given where we are, i continue to expect a significant monetary policy action at the mpc's next scheduled meeting. so in the body of my remarks this afternoon, i don't want to dwell further on what we are trying to achieve or whether we are working towards it. i hope i have made my views on those two questions very clear. rather i want to discuss how the mpc is working towards achieving the 2 % target. the institutional framework for monetary policy just as no man is an island, no economic policymaker works completely in isolation. let me start with a few comments on this observation, starting with the interactions between monetary and fiscal policies. monetary policy is a potentially very powerful tool, central to achieving stability in the overall price level by steering inflation back to target. but monetary policy is also a pretty blunt tool, ill - designed to deal with the distributional consequences of relative price changes – changes in

##ing new technologies and developing skills at the upper end of the value chain ; unless, in other words, the conditions that favour high private investment are re - established. moreover, it is worth remembering that reforms that raise potential growth produce permanently higher income not just for the economy as a whole, but also for governments, through higher tax revenues and more sustainable public debt, which opens up fiscal space. and that, in turn, means there is more scope for fiscal policy to support monetary policy in stabilising the economy. second, in the area of structural reforms, special attention should be paid to measures that bring about a reduction in the debt overhang. certainly, a lot has already been achieved in the banking sector with the creation of the single supervisory mechanism, and as part of that, the comprehensive assessment and the ensuing significant recapitalisation of the banking sector. this has also supported the repair of the banking lending channel and the monetary policy transmission mechanism. but it is clear that, in some countries, the large stock of non - performing loans ( npls ) is still preventing a stronger pick - up in lending. high stocks of npls can dampen credit supply for several reasons : they absorb resources and operational capacity ; they tie up bank capital in unproductive uses ; and they reduce bank profitability, which weighs on banks ’ capacity to generate capital internally. such effects on lending tend to be exacerbated for smaller firms, which are more dependent on bank lending. moreover, slow resolution of npls hampers the necessary process of corporate restructuring during which viable firms reduce their debt and start investing again, and non - viable firms exit from the market. creating the conditions for a rapid workout of npls has to be part of the economic policy actions to restore conditions that favour productive investment. each country has its own list of actions needed to speed up this process, and delays on this front are a serious drag on growth. in particular, well - designed insolvency regimes are key in separating viable from non - viable borrowers and in facilitating the valuation of assets to be sold off. an efficient judicial system is also essential. analysis by ecb staff shows that the pace of deleveraging is faster in countries that have a strong and effective legal apparatus. from this perspective, the recent reform of insolvency law in italy is welcome. it is estimated that the average length of bankruptcy procedures will be halved. foreclosure times are also expected to decrease