) at all times. that target is set by the chancellor. and it is symmetric : that is to say, we worry as much about being below the target as we do about being above it. that makes sense because the problems of severe deflation are just as great as the problems of severe inflation. since may 1997, when the current arrangements were put in place, rpix inflation has averaged 2. 3 %. if inflation is more than one percentage point either side of the target, we are required to write to the chancellor explaining the reasons for the miss and the steps we are taking to bring inflation back to target. there was a flurry of excitement earlier this year when inflation reached 1. 8 %, and many commentators thought that we might soon have to polish up our letter writing skills. but so far we have not had to put pen to paper. of course, a number of factors have contributed to the stability in inflation. monetary policy takes time to affect inflation, so inflation in the early part of this period reflects decisions taken before the mpc was formed. and in the short term at least prices can reflect factors other than monetary policy. but, judged against previous policy regimes in this country, inflation targeting has been successful. of course, you might expect me to say that. but the growing credibility of the arrangements is also reflected in measures of expected inflation in coming years, most of which remain close to the 2½ % target. people often ask if this relative success at targeting inflation has come at a cost in terms of lost output or employment. it is increasingly accepted, i think, that there is no such trade - off in the long run. and, looking at the recent uk data, it is hard to see any trade - off even in the short run. output has now risen for 36 consecutive quarters, the longest continuous expansion since post - war records began. and unemployment is close to its lowest level for a quarter of a century. in my opinion, that has not happened by chance, but is the result of a range of policies. achieving low and stable inflation is the best contribution that monetary policy can make to the wider economic goals of sustainable growth and employment. having an inflation target certainly does not mean that we take no interest in real activity. we have discretion over how rapidly we try to bring inflation back to target when and if it diverges from 2½ %. and we regularly publish our best guess about the likely future path of growth up to a two

of scenarios. it is promising to see the progress made in sonia and as liquidity continues to shift, the benefits of transitioning new business from libor becomes even clearer. but it is also imperative we have a clear path for existing or ‘ legacy ’ libor contracts to transition in a robust manner. legislative processes in the us, eu and uk continue to progress in establishing safety nets for those contracts that can ’ t actively transition ahead of cessation. strong adherence to the isda ibor fallbacks protocol, in the us and uk in particular, has been encouraging. clearing houses are also following suit with their own conversion processes on similar terms. we estimate over 97 % of sterling interest rate derivatives have a robust safety net in place. [ 7 ] but more can and should be done – the protocol remains open for entities that have not yet adhered and it is critical that equally robust fallback arrangements are adopted in cash products too. descending safely : life after libor ‐ speech by andrew bailey | bank of england while it is always the right choice to install the safety net to break your fall in the form of fallbacks, this shouldn ’ t be seen as a substitute for pre - emptive action, ensuring a sure footing on the descent. active transition ahead of libor cessation remains an important part of easing the gradient of that descent – it ensures contractual certainty and allows borrowers, lenders, issuers and investors to retain economic control over their contracts. gbp bond markets are again leading the way, as we have seen over 50 bonds with a value of around £40 billion actively transitioned from gbp libor to sonia. where tough legacy contracts are able to take advantage of that safety net, for example in the form of the proposed synthetic libor we should be clear that this a temporary solution. [ 9 ] supervisory engagement will continue after the end of this year to ensure regulated firms continue to manage that rump and move those exposures onto robust alternatives where that is possible. as those facilities re - new, in most case they should move to the most robust rate available, where we expect the most liquidity to be – in sterling that will be sonia compounded in arrears. the use of forward looking term risk - free rates let me now turn to the critical element of any journey – the destination. the reference rates the market transitions to are important choices. a broad - based transition to more robust overnight risk - free rates can provide the safe descent