an annual frequency, interpolated to create a quarterly series. during exceptional circumstances such as brexit, the mpc has been required by its remit since 2013 to balance such trade - offs. 16 consistent with that requirement, in august 2016, the mpc judged that it was appropriate to set policy after the referendum so that inflation returned to its target over a longer period than the conventional horizon of 18 - 24 months in order to support jobs and activity at a time when uncertainty was elevated and the economy was slowing. chart 10 illustrates the mpc ’ s framework for setting policy to manage this trade - off. the red lines represent the potential trade - offs that the committee could strike : mapping the size of the inflation overshoot that it could be prepared to tolerate for a given amount of spare capacity, and vice versa. the flatter the line, the less weight the committee places on output stabilisation and the more it is willing to tolerate large output gaps in order to eliminate small overshoots in inflation. to be clear, the precise trade - off that the mpc pursues is not determined by the preferences of its members. rather, it is grounded in society ’ s choice of the desired end, as captured by the statutory objectives and the remit the committee is given by government. however, the actual trade - off that is struck will be importantly influenced by mpc members ’ views of both the nature of the shocks hitting the economy and the transmission mechanism of monetary policy. 17 as the remit states : “ in exceptional circumstances, shocks to the economy may be particularly large or the effects of shocks may persist over an extended period, or both. in such circumstances, the monetary policy committee is likely to be faced with more significant trade - offs between the speed with which it aims to bring inflation back to the target and the consideration that should be placed on the variability of output. ” for more detail, see ‘ lambda ’, speech by mark carney at the london school of economics, 16 january 2017. all speeches are available online at www. bankofengland. co. uk / news / speeches charts 10a and 10b demonstrate how the expected trade - off evolved in successive mpc forecasts since the referendum. they show the mpc's central projections at year 2 and year 3 respectively for cpi inflation on the vertical axis against those for spare capacity ( the opposite of excess demand ) on the horizontal axis from successive inflation reports between august 2016 and november 2017

building strong and simple : the first step speech given by victoria saporta, executive director of prudential policy bank of england virtual webinar 29 april 2021 i would like to thank austen saunders and james thatcher for helping me write this speech and david bailey, sarah breeden and sam woods for helpful comments. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice last year, i set out my views on the ideal framework of post - brexit prudential regulation in the uk. i outlined the key features that this prudential framework should exhibit. that it should be legitimate and democratically accountable, that it should have time - consistency embedded within it, and that it should adapt to changing circumstances whilst upholding prudential standards. 1 i concluded that the framework which best embodies these features is one where policy is made by an independent regulatory body, with a clear mandate, and robust accountability mechanisms, in particular to parliament. i am therefore pleased that this was the model consulted on in hmt ’ s regulatory framework review last october. of course the legislative process still needs to be completed. but we at the pra must prepare in anticipation of the enhanced role we are set to play in this post - brexit world. i would like to use this speech to sketch a vision for our updated approach to policymaking, before devoting the majority of my time to giving detail on a key upcoming policy initiative – the so - called ‘ strong and simple ’ framework for small banks and building societies. the pra ’ s changing approach to policymaking under the government ’ s proposals, the pra is expected to move from ‘ rule taker ’ to ‘ rule maker ’ for most areas of prudential policy within our remit. this is a fundamental increase in the scope of our responsibilities. as is only right, this increase in responsibility will be accompanied by a new framework of legal requirements and increased scrutiny, including, importantly, to parliament from which our powers and responsibilities derive. this will include new requirements to ‘ have regard ’ to issues like international standards, equivalence, the relative standing of the uk to do business, as well as climate change and productive finance. we expect more focus on these by external stakeholders, and we are committed to paying due attention to these factors as we carry out our activities. but within the context of this new regulatory framework a key question remains : what