distributions are constructed using data covering the period 2008 - 2016. all speeches are available online at www. bankofengland. co. uk / speeches chart 11 : long - run uk phillips curves sources : thomas and dimsdale ( 2017 ) and bank of england calculations. note : output gap is estimated using a hp - filter technique. wage series used is a composite based on english and great britain estimates. chart 12 : measures of domestically generated inflation percentage change on a year earlier - 1 average of measures first principal component - 2 - 3 sources : ons and bank of england calculations. notes : swathe includes core cpi services, inverse import - weighted cpix, inverse import - weighted core inflation excl. education, unit labour costs, whole economy and private unit wage costs, gdp deflator ( unadjusted, as well as versions excl. exports, oil & gas ), services gva deflator, gva deflator ( unadjusted, as well as excl. government ) and services ppi. all speeches are available online at www. bankofengland. co. uk / speeches chart 13 : world trade in goods and euro - area and us capital goods orders percentage change on a year ago - 1 world trade in goods capital goods orders sources : cpb netherlands bureau for economic policy analysis, european central bank, thomson reuters datastream, us bureau of labor statistics, us census bureau and bank of england calculations. notes : world trade in goods is a volume measure ; capital goods orders is defined as us new orders for non - defence capital goods excluding aircraft, deflated by the private capital equipment producer price index, and euro - area volume of new orders for capital goods, weighted together using 2014 us and euro - area manufacturing value - added data. adjusted to match the mean and variance of annual growth in world trade in goods since 2012. chart 14 : vix and media references of uncertainty annualised standard deviations number of references per month vix ( rhs ) media references to uncertainty ( lhs ) sources : bloomberg, financial times, daily telegraph, guardian and independent. note : media references to uncertainty shows the number of media reports citing uncertainty in relation to a range of political / economic terms across four national broadsheet newspapers ( the financial times, the daily telegraph, the guardian and the independent ). last observation for june 2017 is an extrapolation based on observations for the month to date. all speeches are available online at

weaknesses in risk management, including in the management of contingent, or offbalance sheet, exposures. although developments in the sub - prime market of course continue to unfold, the impact on conditions in broader financial markets has to date been relatively contained. but, in a more severe stress scenario, perhaps in a more significant market such as corporate credit, or one in which several areas of vulnerability were exposed in combination, the impact could have more serious consequences for the financial system. this highlights the potential value of a more rigorous assessment of tail - end risks. in particular, stresstests by financial institutions should attempt to incorporate the behavioural responses of other firms which may have a substantial impact on market conditions. for instance, scenarios should take account of the extent to which many firms might respond to a common shock in a similar way, with potential implications for market prices or market liquidity. the likely amplification of price moves as financial institutions attempt to exit “ crowded ” trades and liquidity dries up is an important example. indeed, given the importance of market liquidity for the efficient execution of banks ’ dynamic hedging strategies and for their activities in the wholesale funding and credit risk transfer ( crt ) and securitisation markets, it is essential that stress tests factor in extreme, yet plausible, scenarios for liquidity conditions in these markets, recognising that market liquidity can evaporate very quickly, particularly for complex structured financial instruments. and it is also essential to factor in increased liquidity needs linked to contingent calls, associated, for instance, with funding margin payments. capital and liquidity buffers a sizeable buffer of capital and liquidity can help a bank to withstand a shock that threatens its solvency or would otherwise leave it with insufficient liquidity to meet its obligations as they fall due. but a bank ’ s private choice as to the size of its capital or liquidity buffer may not be aligned with the socially optimal choice, as firms will not naturally take account of ( or “ internalise ” ) the implications of their distress or failure on the financial system more broadly – for example through the possibility of contagion to other firms and impairment of the financial intermediation system. that provides the justification for prudential regulation. i will not dwell here on the value and importance of capital adequacy standards in containing systemic risks – enough has been written on the basel accord and basel ii, such that this is well understood. however, consistent