coming to completion this year – it did not currently see a case for recommending changes to the uk regulatory framework. i am afraid, for financial stability, that is as good as it gets. the financial sector evolves at a phenomenal speed. risks can change and build very quickly. so the fpc will have to repeat its assessment of risks from the non - bank financial sector at least annually. in this area, as in the banking sector, it has to keep risk under close and regular review. and it has to be prepared to act. but that, of course, is the nature of preserving financial stability and preventing a reoccurrence of the illusions i described earlier. bis central bankers ’ speeches

##onfirmed in our remit from the chancellor in march. the mpc ’ s guidance is fully consistent with price stability. i can also assure you of my personal commitment to price stability. i certainly have no hesitation in raising interest rates when required – when i was governor of the bank of canada, we raised interest rates as the recovery there gathered pace. but that was the appropriate policy for canada at that time. the challenges in the uk today are different, and policy must be tailored accordingly. the bank of england ’ s remit recognises that, at times, it is appropriate to bring inflation back to target more slowly in order to avoid unnecessary volatility in output. with a depressed level of output and inflation above target due to temporary factors rather than demand the trend is adjusted for the secular decline in north sea oil and gas production. bis central bankers ’ speeches pressures, this is such a time. the mpc is charting the right path back to its 2 % inflation target. cpi inflation is currently being pushed up by rises in utility prices and tuition fees that do not reflect the underlying pressure of demand on supply, along with the effect of past increases in import prices. underlying domestic inflationary pressure is subdued, with wages growing at only around 1 % per year. although there will be bumps in the road, inflation is set to fall back over the next two years. in these circumstances it would not make sense to choke off the recovery by raising interest rates prematurely. given that ‘ administered and regulated ’ price increases will continue to push up on inflation over the next two years, the mpc is prepared to bring inflation back to the target over two years or a little longer. rest assured, however, that we will bring inflation back to target – and at each point we will ensure that risks to price stability are contained. our forward guidance builds in important safeguards of price stability. if there are any signs of underlying inflation pressures building such that it seems inflation 18 – 24 months ahead will be 2. 5 % or more, or if medium term inflation expectations are no longer sufficiently well anchored, then the guidance on interest rates no longer applies. these safeguards give ample flexibility to bring inflation back to target at the appropriate pace, while ensuring that risks to price stability are contained. market reaction to forward guidance much has been made of the upward movements in market interest rates since our announcement of forward guidance. let me give you my perspective. there has been a generalised upward move in long - term