. for all the commentary about ‘ group think ’ on the committee, i see little evidence of that in our discussions or published votes. but trying to shoehorn that necessary and constructive diversity of opinion into a common statement [ 15 ] is understandably – and probably inevitably – confusing. it certainly is hard to encompass the prevailing diversity of opinion into a short and clear statement of forward guidance. and if, in that context, attempts at guidance create confusion rather than clarity, then surely the time has come to retire them. taking a more personal point of view, there are several reasons why i support our new form of communication introduced in june. my underlying antipathy towards ( capital f, capital g ) forward guidance has not diminished with the first - hand experience of it in this role. in particular, the ‘ further tightening ’ language previously employed could not be maintain indefinitely, at least not without taking the ( ultimately indefensible ) view that the level of rates does not matter. more generally, such guidance is a trap : attractive at the outset but difficult to exit from gracefully. moving to new language – without the capital f, capital g forward guidance – reflects that reality. whatever our initial intentions, markets and the media assign their own meanings to specific forward guidance language, which may mislead and / or undesirably constrain policy makers ’ freedom of manoeuvre. on my reading, the ‘ further tightening ’ language came to be understood as suggesting rates would keep on rising at a pre - defined modest pace, largely independently of events and data. not only did this give a false – and thus misleading – impression that bank rate was set to move mechanically and unconditionally upward over the coming months, but it also discouraged markets from pricing the macroeconomic risks to the interest rate outlook. that mispricing is ultimately costly for the efficiency of capital allocation. our new statement [ 17 ] has the form : the mpc will take the actions necessary to return inflation to the 2 % target sustainably in the medium term, in line with its remit. the scale, pace and timing of any further increases in bank rate will reflect the committee ’ s assessment of the economic outlook and inflationary pressures. the committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response. i ’ ll conclude by offering a few observations on this language from my perspective. first, by focusing on the ‘ scale, pace and timing ’

several important risks to this outlook. the first concerns oil prices. so far the world economy has apparently taken a tripling in oil prices in its stride, thanks to the much lower oil intensity of output, and the greater flexibility in labour markets, in most advanced economies compared with a generation ago. it is also true that the short term capacity of oil producing countries to spend their increased revenues is now much greater than it was in the 70s. this helps to explain why consensus forecasts for world gdp growth next year have remained remarkably steady. but there is a very high level of uncertainty about future oil prices. judging by the oil futures curve, the central view is that prices are likely to remain high, at around $ 60 per barrel for the next few years at least. this is in contrast to 2000, when the oil futures curve was downward sloping. but the range of current consensus forecasts is very wide – from around $ 45 and $ 75 per barrel. and oil option prices – admittedly a very imperfect measure – suggest that there is a 15 % probability of oil prices rising above $ 80 a barrel and a 5 % probability of them falling below $ 40 in six months time. if oil prices rise no further their impact on headline inflation should be temporary. but a series of positive oil shocks might have the effect of pushing up headline inflation for an uncomfortably long period. in contrast to the 1970s and 1980s, inflation expectations in major oil consuming nations have been well anchored for the best part of a decade. but there ’ s no room for complacency. the unfamiliar experience of higher inflation might well dislodge those expectations, if there was any wavering incentral banks ’ perceived commitment to keep inflation low. this could also prove damaging to consumer and business confidence. 2 / 3 i claim no special insight into the oil market, and especially into its likely short term movements. but it is hard to miss the longer term challenges which the rapid economic development of china – and india – pose for resource markets, and especially energy markets. china is now the world ’ s second largest oil importing country after the us, and last year alone it accounted for nearly a third of the net increase in world oil demand. in per capita terms, its own oil resources account for less than 10 % of the world average. yet its oil demand is set to grow strongly in the longer term. oil supply is traditionally slow to respond to changing prices – lead times for developing new fields are often around