##england. co. uk / news / speeches first, one widely - used measure of the risks to economic chart 10 : measures of uncertainty stability is the measure of global policy uncertainty shown in chart 10, taken from the may 2019 inflation report. this has risen sharply in the past couple of years and to historic highs ; it fell back in the most recent, april, data, but remains high. against the backdrop i have been discussing of slowing global growth, trade tensions and brexit uncertainty, that is not surprising. but it suggests a policy environment that could potentially be challenging. - 1 many of the drivers of elevated policy uncertainty are differences from averages since 2002 ( number of standard deviations ) - 2 policy uncertainty vix fundamentally shocks to supply, which monetary policy is not able to offset, rather than demand. but they could introduce a more complicated policy trade - off for the the policy uncertainty index is available at http : / / www. policyuncertainty. com /. this chart shows data to end - april. mpc. and they represent risks to financial stability which the fpc needs to be mindful of and prepared to respond to. that is particularly the case given the apparent disconnect between this measure of policy uncertainty and measures of market uncertainty, for example the vix measure of us equity market uncertainty which is also shown on the chart. the vix has risen far less than the policy uncertainty index in recent months, suggesting market participants see relatively little risk of major disruption. it has picked up a little in the recent data as us - china trade tensions intensified, but has also fallen back to below historical averages. this apparent disconnect does not necessarily mean that markets are complacent – the policy uncertainty index might be more sensitive to short - term political developments, while market indices could also be factoring in a belief that monetary policy might be able to offset the impact of shocks. but if market participants are underestimating the extent of political risks materialising, that suggests the potential for sharp price corrections if those shocks do come about. the second risk i want to highlight today, and unarguably biggest risk to the uk economy and uk financial stability, remains that of a brexit outcome of no deal and no transition. that would have large negative economic effects, both in the bank ’ s view and in the views of the businesses we talk to up and down the country ( chart 11 ). this has been a key focus for

, annual gdp growth troughed at - 6. 1 % and inflation see - sawed between close to 1 % and over 5 %. quarters from gdp peak canada italy us france japan germany uk and the uk fared worse than most of its peers ( chart 4 ). why did the crisis trigger such a severe recession, and why was it particularly bad in the uk? one reason was that the pre - crisis build - up of debt had been so large. another was the very large size of the uk financial sector, which acted to amplify rather than reduce the blow. interest rates on credit spiked, and lending to households and businesses came to a standstill. partly as a result, it gradually became apparent that the hit to demand had been accompanied by a large and permanent hit to the level of productivity – that is, the amount of output the economy was actually capable of producing – and a sustained slowing in its growth rate. gdp took many years to return to trend growth. and that trend was itself much weaker than what had become seen as normal in the pre - crisis decades. having appeared to be among the most resilient economies in the g7, the uk revealed itself to be one of the least resilient. i take three key lessons from the financial crisis and what followed. the first lesson – which seems obvious in hindsight – is that the past is not necessarily a good guide to the future. the second is about what constitutes resilience. we had thought the uk economy was resilient, but we were looking at a narrow form of resilience – by focusing on resilience in terms of gdp growth and inflation, we had failed to realise how fragile the financial system had become, both in response to and as a source or amplifier of shocks. we should have been thinking about and tracking developments much more broadly. and, following on from the first two, the third lesson is that policy needs to be prepared for the unexpected. what i want to use the rest of this speech to talk about is how i think about stability and resilience in light of those three lessons now that i ’ m at the bank of england, and how that has influenced my approach to monetary and financial policy setting in the face of recent and future shocks. all speeches are available online at www. bankofengland. co. uk / news / speeches 2 a broader assessment of resilience my first lesson from the financial crisis was that the past is not