. despite the speed with which bank rate was cut to 0. 5 % in late 2008 and early 2009, and the rapid move to quantitative easing, the economy is still looking fragile. during the pre - crisis period, mpc members recognised in a number of speeches the possibility that the upward trends in property prices and in the growth of credit were increasing the risk of a period of economic instability. for example, as long ago as 2003, charlie bean suggested : “ action taken today to reduce the build - up of imbalances might pay off in the longer term by reducing the future uncertainty that the policymaker will face as imbalances unwind. ” 2 at around the same time i commented, with reference to the rising household debt / income ratio, that this “... may have increased the risk from policy error, or from an adverse shock to the household sector. ” 3 and andrew large argued : “ the key issue world trade monitor, source : netherlands bureau for economic policy analysis. bean ( 2003 ). barker ( 2003 ). for monetary policy is that the more capital gearing or leverage increases, the greater the vulnerability to shocks and the consequent adjustment to consumption behaviour. ” 4 one conclusion might be that the depth of the present crisis might have been mitigated if the mpc had taken the view that, in those circumstances, it was preferable to miss the inflation target on the downside in the short - term. some former members of the mpc have certainly argued more recently 5 that it would have been preferable to have “ leant against the wind ” of credit growth by having had higher interest rates during the mid - 2000s. but on the whole, i continue to think that there are a number of problems with this proposal. firstly, it is unclear how much higher uk interest rates would have needed to be to have kept the expansion of credit and debt to an acceptable level ( not least as there is considerable uncertainty about what that level might be ). it seems likely that interest rates might have needed to be substantially higher, in real terms, to have had any noticeable effect. in this case, cpi inflation could well have seen an extended period below target. ( the cpi was in any case below target for the first 18 months after the change to cpi from rpix as the key inflation measure. ) there would in these circumstances have been a risk of a damaging loss of credibility in the inflation targeting regime – although it would clearly have had

, and to have done so alongside such excellent and stimulating colleagues. since mid - 2007 decisions have become more difficult and the task more stressful, but the overriding objective of achieving the cpi inflation target and maintaining confidence in this target has remained the right guide for policy. a significant part of an mpc member ’ s work is explaining policy to various audiences, or accompanying the banks ’ regional agents on visits and discussions with business and other contacts. i am sure that the work of the bank ’ s twelve agents based around the uk, and the willingness of mpc members to be seen out and about, both contribute to the credibility of the mpc. they also serve the valuable purpose of giving us high - quality and up - to - date feedback on business trends. while these visits enable business audiences to question and debate policy, perhaps another aspect of accountability has been a little less satisfactory. once a quarter, several members of the mpc accompany the governor to an appearance before the treasury committee. the purpose of the sessions is to hold us to account for our individual votes. however, despite some recent improvement, it remains the case that the vast majority of questions from the mps tend to be directed at the governor. my view is that it would be better in future to ensure that each mpc member attending, including the external members, has the opportunity to explain their recent votes and to comment on the key policy issues. as i leave the mpc, the challenges remain considerable. in retrospect, my first two terms on the mpc were periods which now look like the small change of monetary policy – small changes in bank rate aimed at adjusting for relatively small anticipated deviations of inflation from target. as i suggested at the start, it may however also have been the period in which a large error was made in allowing the belief to become established that policymakers had solved the issue of economic instability. as jean - claude trichet recently commented : “... remedial action has often been triggered as soon as the financial firestorm has threatened the stability of the economic system. but such action risks raising expectations that macroeconomic policy will always insure against tail risks, no matter how large. ” 13 even when policymakers have added robust macroprudential instruments to their armoury, it will be important to be clear that there will still be sources of macroeconomic instability. this may not be easy during any prolonged period without such a shock, unless policymakers are prepared to be a