, if the baseline scenario in our most recent projections is confirmed, we will still have ground to cover to make sure that inflation pressures are stamped out. second, while the european banking sector is resilient, with strong capital and liquidity positions, in view of recent financial market volatility, we are ready to act and provide liquidity support to the financial system if needed and to preserve the smooth transmission of monetary policy. but it should be clear that there is no trade - off between price stability and financial stability. as we have proven many times, we are able to set the appropriate policy stance to control inflation and at the same time use other instruments to address risks to monetary policy transmission. we did this when we decided to use reinvestments under the pandemic emergency purchase programme more flexibly, and when we agreed on the transmission protection instrument. these programmes ensured that rate normalisation proceeded smoothly. the third element of a robust strategy is a clear reaction function. at our last meeting, we clarified our reaction function and the sources of information that will be important to us. the future calibration of the rate path will be determined by – and will require continuous monitoring of – three key inputs, and this is what i will explain now. the inflation outlook the first input is our assessment of the inflation outlook in light of the incoming economic and financial data. this will be informed primarily by our staff inflation projections. monetary policy must be forward - looking, given the lags with which our policy works. and the staff inflation projections are the best mechanism for distilling incoming economic and financial data into a comprehensive picture of medium - term inflation dynamics. the future rate path will depend on whether we see inflation converging durably to our target in our forecasts, and the level of confidence we have in this convergence as captured by the balance of risks. our latest forecasts see headline inflation at 2. 1 % in 2025 and core inflation at 2. 2 %, which is a downward revision compared with our last projection round in december. but the confidence band around these forecasts is now unusually wide. as the cut - off date for the projection round was in early march, the forecasts do not incorporate the effects of the recent financial market tensions. those tensions have added new downside risks and have made the risk assessment blurrier. more generally, many of the assumptions in the projections, such as those on fiscal policies and energy and food prices, are volatile

, a benchmark based on such shaky foundations will collapse. just like hammersmith bridge. only it won ’ t be a few thousand disadvantaged families, it could be the entire global financial system that suffers, with unimaginable consequences. we can ’ t let that happen. and that ’ s why, for the past six years, we ’ ve been doing two things : - first, we ’ ve been constructing a new bridge. for sterling borrowers, that bridge is built on the foundations of sonia – the sterling overnight index average, produced every day by us at the bank of england and based – unlike libor – at around 60 billion pounds of real, daily transactions1 ; - and, second, while that work has been underway, we ’ ve shored up the old libor bridge, through the fca ’ s agreement with libor panel banks to continue providing submissions to the benchmark. but those repairs were only ever temporary. the fca can ’ t replace those markets that used to underpin libor submissions : they are gone forever. and the fca ’ s agreement with the panel banks runs out at the end of 2021. from 2022, therefore, the availability of libor cannot be guaranteed. something that is unsafe today will become lethal at the end of next year. the sterling overnight index average ( sonia ) is administered by the bank and reflects the average of the interest rates that banks pay to borrow sterling overnight from other financial institutions see www. bankofengland. co. uk / markets / sonia - benchmark. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice avoiding that outcome is what we ’ re here today to discuss. but before we dive into the detail i want to leave you with three key messages : - first, libor transition affects every company that borrows in sterling. you cannot ignore it, or hope that it goes away : you need to act well before the end of 2021. - but, second, there is time if you start now. that new bridge i mentioned a moment ago is up and running. by the end of this month, all lenders should be ready to offer you products linked to sonia or another non - libor rate. six or twelve months ago, that wasn ’ t universally true. now it is. but don ’ t just take my word for that. ask national express, which took out one of