and, as they do so, the supply of mortgage finance is being restricted. once the adjustment in the financial sector is complete, banks will be able to resume lending. but the era of cheap mortgage finance that underpinned the housing market in 2006 and the first half of 2007 is over and, as a result, it is reasonable to expect the ratio of house prices to incomes to fall back, though with real interest rates still low by the standards of the past fifty years, not to previous averages. these changes to our spending power and to the housing market are “ real ” shifts that, although not easy to accept, we cannot side - step. lord mayor, we face the most difficult economic challenge for two decades. but i am confident that we can meet it. inflation will fall back and growth will recover. but the cost of the necessary adjustment will depend on the credibility of the framework for monetary stability. after all, the value of paper money rests on only one thing – trust. trust in the ability and determination of those setting interest rates to maintain the value of money. central to that is the independence of the bank of england. an independent central bank has, over time and around the world, proved to be a cornerstone of the arrangements necessary to underpin trust in paper money. so, chancellor, i welcome your intention to introduce a proper process for making appointments to positions on the monetary policy committee. i welcome too, chancellor, the announcements you made tonight about the shape of a new framework for financial stability to be embodied in a banking bill. i particularly welcome the new responsibilities for the bank of england and associated reforms to our governance. we now have the chance to put in place a set of reforms that provide a coherent framework for banking regulation. it is an opportunity we must not throw away. i can assure you all that the bank of england will devote time and resources to meeting the new responsibilities which the chancellor plans to give us. lord mayor, shortly after assuming office, you were quoted as saying, “ i think like a lawyer. i ’ m very prudent, very risk - averse ”. what a pity you weren ’ t running a bank a year or two ago! but in a difficult year for the city you have provided leadership and thrown yourself into the enormous workload of your office. tonight all of us here would like to pay tribute to your work since you became lord mayor, and to thank both the lady mayoress and yourself for the splendid hospitality which

at sic1 - digit level. x - axis shows an estimate for the automation rate in 2001 based on frey and osborne estimates for the future probability of automation by occupation. y - axis shows change in labour share between 2001 and 2016. size of bubbles represents size of industry. trend line weighted by size of industry. chart 23 : settlements data ( whole economy ) per cent whole economy settlement ( 12m mean ) whole economy settlement ( 3m mean ) source : bank of england, incomes data research, xperthr, incomes data service, labour research department and bank calculations. note : “ 3m mean ” refers to annualised three month - on - three month settlement rate, and “ 12m mean ” refers to settlement compared to same period a year earlier. all speeches are available online at www. bankofengland. co. uk / speeches chart 24 : distribution of pay packets percentage of employees < 0 > 0 & < 1 > 1 to < = 2 > 2 to < = > 3 to < = 4 > 4 to < = 5 > 5 settlement by bucket ( per cent ) sources : bank of england, incomes data research, xperthr, incomes data service, labour research department and bank calculations. all speeches are available online at www. bankofengland. co. uk / speeches table 1 : wage growth models variables awe awe awe awe awe awe inflation expectations ( lagged one quarter ) 0. 718 * * 0. 361 0. 680 * * 0. 323 * 0. 464 * * ( 0. 270 ) ( 0. 237 ) ( 0. 255 ) ( 0. 143 ) ( 0. 161 ) inflation 0. 417 * * ( 0. 023 ) unemployment gap - 0. 847 * * - 0. 709 * - 0. 857 * * - 0. 038 ( 0. 198 ) ( 0. 289 ) ( 0. 313 ) ( 0. 055 ) involuntary part - time employment share trend productivity growth - 0. 602 * - 0. 237 ( 0. 297 ) ( 0. 364 ) 0. 834 * * 0. 763 * 0. 708 * 0. 888 * * 0. 735 * * ( 0. 166 ) ( 0. 340 ) ( 0. 275 ) ( 0. 199 ) ( 0. 160 ) 2. 646 * * 0. 896 ( 0. 739 ) ( 0. 843 ) voluntary