without leading to a pickup of inflation? or is there a risk that the apparent insensitivity of inflation to movements in the economy is only temporary, and might lead to mistakes in monetary policy if low inflation were taken for granted? to answer those questions, i want to consider three possible explanations for why inflation has not so far risen despite substantial falls in unemployment and spare capacity. first, reforms enacted over the past twenty - five years have made the labour market more flexible and lowered the rate of unemployment consistent with stable growth in money wages. incentives to work have increased - through initiatives like the new deal and the working tax credit. benefits paid to the unemployed have fallen relative to earnings. and the share of wage settlements covered by collective bargaining has fallen sharply. those reforms, and a steady growth in total money spending, ensured that unemployment fell in almost every quarter since 1992 while wage inflation remained broadly stable. moreover, changes in unemployment have resulted in smaller movements in the rate of wage increases than in the past. it is possible that migrant labour may be easing the bottlenecks and skill shortages in what is undoubtedly a tight labour market. reports from our business contacts around the country, collected by our agents, suggest that migrant labour is indeed relieving some of those shortages, more so in recent months with recruitment from the new members of the european union. migrant workers are employed in fish processing here in the south - west, and even in the production of cornish pasties, as they are in an increasingly wide range of industries in manufacturing, construction and services. that may be suppressing signs of underlying wage pressure that would otherwise have become evident by now. second, an increase in the pace of productivity improvement may have made it possible for output to grow more rapidly without adding to inflationary pressure. on the face of it, however, there is little evidence for this hypothesis. productivity in the private sector - measured as output per hour worked has grown at an annual rate of around 2 ½ % since 1995, around the average rate in the period 1980 - 1995. in the united states, private sector productivity growth increased from 1 ½ % in the earlier period to almost 3 % after 1995. it is striking that productivity growth in the private sector was higher in britain than in the united states for most of the past quarter of a century, although our level of productivity remains inferior. only in the past few years has american productivity accelerated. no such change is yet visible in the official data for the united kingdom. it

we need both a resilient financial system and adaptable supervisors. to ensure stability, the financial system needs to be able to weather rapid changes that produce shocks. and regulators and supervisors need to adapt to an ever - changing economic landscape if they are to continue to effectively safeguard the financial system. after all, unexpected crises often come from unobserved risks that were allowed to grow over time and materialise. that is why macroprudential policy must remain alert to the emergence of new challenges as and when they appear. we therefore need to encourage resilience wherever it is lacking, and adapt to change whenever necessary. with this, i now open the sixth esrb conference. 1. welcome remarks pre - recorded on 24 november 2022. 2. esrb ( 2022 ), “ warning of the european systemic risk board of 22 september 2022 on vulnerabilities in the union financial system ”, 22 september. 3. feder, a., fred - torres, s., southwick s. m., and charney d. s. ( 2019 ), “ the biology of human resilience : opportunities for enhancing resilience across the life span ”, biological psychiatry, vol. 86, no 6, pp. 443453. 4. hosseini, s. barker, k., and ramirez - marquez, j. e. ( 2016 ), “ a review of definitions and measures of system resilience ”, reliability engineering & system safety, vol. 145, pp. 47 - 61. 5. latest data point q2 2022. based on the methodology outlined in cera, k. ( 2022 ), “ measuring marketbased and non - bank financing of non - financial corporations in the euro area ”, box 2 in ecb committee on financial integration ( 2022 ), “ financial integration and structure in the euro area ”, april. 6. behn, m, rancoita, e. and rodriguez d ’ acri, c. ( 2020 ), “ macroprudential capital buffers – objectives and usability ”, macroprudential bulletin, ecb, no 11, 19 october. 7. lagarde, c. ( 2022 ), “ monetary policy in a new environment ”, speech at the european banking congress, 18 november. 8. enria, a. ( 2022 ) “ better safe than sorry : banking supervision in the wake of exogen