vulnerabilities in liability driven investment ( ldi ) funds amplified the impact of an abrupt change in fiscal stance into a selfreinforcing spiral in government bond prices. long maturity nominal gilt yields rose by 130 basis points in a matter of days – three times the size of any comparable historical move – and we were required to intervene to safeguard financial stability. a temporary and targeted backstop purchase facility for gilts proved effective in ending the firesale dynamic, providing the ldi funds with a window to increase their resilience while minimising risks to public funds, market incentives and the stance of monetary policy – which, unlike in 2020, was now in a tightening phase. in my remarks today, i want to discuss four main lessons that i take from those events : 1. the changing nature of systemic liquidity risk : though focus naturally alights on the idiosyncrasies of the autumn fiscal announcements and the uk ldi sector, the real import lies in the features the events had in common with the dash for cash and other similar developments : another reminder, if more were needed, that we face a new era of liquidity risk, originating outside the banking system, that can amplify shocks, destabilise core markets and undermine monetary and financial stability. 2. public backstops vs private self insurance : as a central bank it fell to us to provide a public backstop to prevent systemic liquidity risk from undermining monetary and financial stability. at the same time, the events revealed material weaknesses in pension fund and ldi risk management. given the costs involved, we must ensure public backstops do not end up substituting for a failure to achieve the appropriate level of private insurance against liquidity risk here and elsewhere in the non - bank sector. 3. ensuring we have central bank tools that are effective : to backstop these new forms of systemic liquidity risk effectively, central banks need the right tools – to detect risks in a timely way ; and to respond. in the ldi case, early warning required the use of qualitative as well as quantitative market intelligence. effective response required the use of a buy / sell facility. lending directly to non - banks would not have worked in this case. but it has many desirable properties for other scenarios, and is a high priority for future work. 4. calibrating central bank tools to minimise risk : backstop facilities must be carefully designed if they are to be effective in

the key question now is where are we going from here. well, the relatively good news is that the external economic storms seem to be beginning to abate. the us in particular, which experienced negative growth in the middle of last year, saw a surprisingly strong recovery on the back of a reversal of falling stocks, over the winter ; and while this may not have continued on the same scale through the spring, consumer spending has remained encouragingly resilient. the uncertainty looking forward relates primarily to the prospects for a recovery of investment spending as we move into the second half of the year. most economic analysts - including ourselves in the bank - are reasonably optimistic, pointing in particular to the continuing underlying strength of us productivity growth despite the economic slowdown and evidence that demand for computer hardware has picked up. the consensus economic forecast is for overall growth in the us - perhaps after something of a lull in the second quarter - to pick up steadily to around trend - to 3 % or perhaps somewhat more - through the second half of the year into next. but it has to be said that many us businesses themselves seem less convinced about future earnings prospects ; and financial markets, too, remain uncertain, notably about equity valuations - partly as a result of the recent spate of corporate governance and accounting failures. the outcome in the us, of course, is fundamentally important to the prospects elsewhere. but on the reasonably optimistic consensus view for the us, the outlook is for recovery to around trend growth in the eurozone and for modest positive growth even in japan. and there are encouraging signs of stronger growth elsewhere in asia - though parts of south america have problems of their own. if global economic recovery seems likely to provide a more hospitable international environment for our own economy, so, too, do recent developments in foreign exchange markets. last year i pointed out that sterling ’ s exchange rate was at a 15 year low against the dollar, but close to its peak against the euro. in overall terms sterling ’ s effective exchange rate index against currencies generally had been relatively stable - at around 105 plus or minus 5 % - for most of the past 2 - 3 years. that pattern of exchange rates made life particularly difficult for the euro - exposed sectors or our economy, and, given that the eurozone represents over 50 % of our external trade, contributed significantly to the imbalance within our economy. happily, from our point of view, and indeed in the context of the global external imbalance,