. the first is so - called “ forward guidance ” about monetary policy. how you judge its success hinges crucially on what you consider to have been its objective and audience. if you are a financial market participant whose job it is to price the future path of interest rates, the most useful type of policy guidance is precise and time - specific. by contrast, if you are a company or household considering whether to spend, a general idea of the direction and destination of interest rates is likely to be sufficient. the critics of forward guidance have tended to be financial market participants for whom it lacks sufficient precision and time - specificity. but forward guidance simply cannot be that precise ; it depends on the path of the economy. and pricing interest rates in financial markets was not the main purpose of forward guidance in the first place. its purpose was to support spending in the economy by households and companies. that calls for shorter and simpler guidance, focussed on the broad direction and destination of interest rates. the mpc first used the words “ limited and gradual ” in 2014 when describing the likely future course of interest rates rises. it was short and simple – three little words. it was guidance aimed squarely at households and companies, offering them an indication ( but no promise ) of the broad direction and destination of interest rates. surveys suggest this message was understood by a majority of companies and some households. by allaying fears about too - rapid a rise in rates, it is likely to have encouraged spending and supported the economy. when the mpc did come to raise interest rates, in november 2017 and again in august 2018, it is interesting to see how well these were understood by companies and households. around three - quarters of households, and around 90 % of companies, had expected a rise in rates within the year ahead in surveys held immediately prior to the decisions. simple, directional forward guidance on monetary policy appears, for this non - expert audience who comprise most of the spending in the economy, to have been effective. a second monetary policy example comes from the bank ’ s quarterly inflation report. this was first produced over 25 years ago, as part of the first wave of the transparency revolution. it is a long and technical document, with language requiring at least 13 - 14 years of education to understand. the complexity of its language meant the report was probably only accessible to around 10 % of the population. bank of england ( 2013 ) provides a useful summary of concepts and issues relating to forward guidance ; see carney

church, we cannot promise that bad things won ’ t happen to our flock – the prevention of all financial crises is in neither our nor anyone else ’ s power, as a study of history or human nature would reveal. and experience suggests that attempts to encourage a better life through the power of voice is not enough. warnings are unlikely to be effective when people are being asked to change behaviour which seems to them highly profitable. so it is not entirely clear how the bank will be able to discharge its new statutory responsibility if we can do no more than issue sermons or organise burials. whatever the ultimate shape of the structure and regulation of the banking system – and, as many of you have said, we need to think carefully to get this right – change will be necessary. the costs of this crisis are not to be measured simply in terms of its impact on public finances, the destruction of wealth, and the number of jobs lost. they are also to be seen in the lost trust in the financial sector among other parts of our economy. for a generation or more, businesses and families up and down the country were told, not least by the city, that the disciplines of the market economy were essential, even if painful in the short run, for greater prosperity in the longer term. that belief in the merits of a market economy was embraced and for many years was not misplaced. but out of the blue – in this case the financial sector – came a crisis that did not stem from weaknesses in the real economy. it has wreaked havoc on those same businesses and families. unemployment, as we saw in today ’ s figures, is rising sharply. and yet it is the banking system that has received financial support on an almost unimaginable scale. we who work in the financial sector have much to do to regain the trust of those who work outside it. “ my word is my bond ” are old words, but they were important. “ my word is my cdo - squared ” will never catch on. there is no support in this country, and no case, for excessively bureaucratic regulation. but change to the structure, regulation and indeed culture of our banking system is necessary. blaming individuals is no substitute for acknowledging the failure of a system, of a certain type of banking. we have a real opportunity now to put that right, and regain the trust that has been lost. lord mayor, as we prepare to toast the bankers and merchants of the city of london, we remember