be whether the recent repricing of uk assets reflects a changed assessment by markets of the uk macroeconomic policy mix between fiscal and monetary policy [ 6 ]. the extent to which that can be determined will depend on whether markets settle at a new level, which itself will depend in part on getting a clearer picture on fiscal policy and the fiscal outlook. prospects for inflation what does all this add up to in terms of the overall impact on the economy and on inflation. an obvious starting point might be to look at the evolution of our forecasts over the last year in response to the four shocks i ’ ve highlighted and other developments. the picture you get is of successive upwards revisions to inflation and successive downwards revisions to growth, with the energy price shock the principal driver of both ( chart 7 ). by the time of the august 2022 mpr, the mpc was forecasting a recession starting in the current quarter and lasting throughout 2023, with a peak to trough fall of gdp of 2. 1 %. but because the fiscal and financial markets shocks post - date the most recent forecast it wouldn ’ t make sense to extrapolate this trend of forecast revisions forward as a starting point for our november forecasts. chart 7 : mpc ’ s inflation forecasts and mpc ’ s annual gdp growth forecasts sources : ons and bank calculations. in the august mpr we had already noted that that the risks around our projections from both external and domestic factors were exceptionally large, given the very large rise in wholesale gas prices and the consequent impacts on real incomes for households and on inflation. the mpc ’ s initial assessment of the energy price guarantee, first made at the time of the september mpc, is that it will significantly reduce the degree of uncertainty around the outlook for uk retail energy prices over the period of the guarantee and therefore also for cpi inflation. as a result the guarantee means that cpi inflation is expected to rise by less in the near term, peaking at a little under 11 % in october, lowering and bringing forward the expected peak in inflation, relative to the mpc ’ s august forecast. for the duration of the guarantee this should reduce the risk that a long period of externally generated inflation leads to more persistent domestic price and wage pressures, although the mpc agreed that risk remained material. at the september mpc we also noted further signs of continuing strength of domestically generated inflation, that the labour market remains tight and domestic costs and price pressures including from businesses are

##ation tranches is challenging. one solution is to use credit ratings but the shortcomings of that approach were exposed during the crisis. another is to use a regulatory formula capturing dimensions of risk such as the credit quality of the underlying pool, tranche seniority and maturity. in our view, including a differentiation based on stc in that capital calculation helps to capture other important dimensions of risk related to structure, transparency and governance. because one of our objectives is to broaden the investor base, it is important that the stc designation makes things simpler for investors, particularly non - banks. for example, they should be able to place greater reliance on it when conducting their own due diligence on matters covered by the stc criteria, such as risk retention. investors would thus be in a position to concentrate with more confidence on other, existing due diligence requirements, such as in relation to the creditworthiness of the underlying assets and cash flows characteristics. the implementation process for the stc designation is therefore important. in our view, the primary obligation should be on the originator to attest compliance with the criteria. but this needs to be in the context of a regulatory regime with effective supervisory oversight and sanctions. we must also be careful not to label all non - stc transactions as “ bad ”. there should be a continuing place in the market for many transactions that do not qualify for the stc designation, including synthetic transactions, managed portfolios and pools that do not meet the granularity requirements. turning to capital requirements, looking at historical losses on securitisation tranches, we think the calibration of bank capital requirements that the basel committee published in december is broadly right. but there is a case for some lowering of capital requirements for stc transactions on the grounds of lower structure risk. a stronger argument can be made that solvency 2 standardised capital requirements for eu insurers are still too high, especially at longer maturities – although it should be noted that these will not apply to insurers using internal models. for banks and insurers, part of the issue with securitisation capital requirements is the comparison with covered bonds, which tend to be treated favourably in eu regulation. issuers looking to raise secured funding may therefore see covered bonds as a more cost effective alternative to securitisation. covered bonds have a legitimate role in the market as a source of stable long - term funding. but securitisation has the