have a rooseveltian fear of fear itself. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice if the economy were sat on a psychiatrist ’ s sofa, the diagnosis would not be especially difficult. a propensity to dismiss good news and dwell on bad? to catastrophize about the future? the sense of events being beyond our control? these are the psychological symptoms of anxiety. and collective anxiety is as contagious, and could be as damaging to our well - being, as this terrible disease. averting an economic anxiety attack calls for a balanced and flexible approach to the words and actions of businesses and policymakers. planning for the worst is important, but needs to be accompanied by hope for the best. encouraging news about the present needs not to be drowned out by fears for the future. now is not the time for the economics of chicken licken. 8 that means balance in how the economic outlook is described, acknowledging good news as well as bad, contemplating upside as well as downside scenarios, taking positive signals ( as well as some comfort ) from the resilience shown so far. this is not boosterism ; it is balance, at a time when behavioural biases and pessimistic popular narratives offer an unbalanced lens on the economy. the policy authorities, including the bank, have a public responsibility to avoid economic catastrophizing. policymakers, including the mpc, have already demonstrated a willingness to act at speed and scale to mitigate economic risks. they have put in place the uk ’ s largest - ever economic insurance policy. it is important this insurance policy continues to flex as new risks arise, to build damaged confidence among households and businesses. for its part, the mpc has committed to keeping borrowing costs at current extraordinarily low levels to support jobs and incomes for as long as necessary to return inflation to target. the fictional fowl who, having been hit on the head by an acorn, declared the sky was falling in. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice references akerlof, g and shiller, r. 2009. animal spirits : how human psychology drives the economy, and why it matters for global capitalism. princeton. gigerenzer, g. 2004. ‘ dread risk,

‘ central bank independence ’, speech at the seanza governors ’ symposium, 26 august 2000. all speeches are available online at www. bankofengland. co. uk / speeches over the past twenty years, we have also learned a few important lessons. allow me to highlight three. first, the financial crisis exposed how a healthy focus on price stability became a dangerous distraction. central banks had won the war against inflation during the great moderation only to lose the peace as vulnerabilities built inexorably. now monetary policy isn ’ t best placed to address risks to financial stability but the challenge is that the necessary financial policy decisions are also subject to time inconsistency problems. financial lobbies are strong, and the temptations of a dash for growth are powerful. conversely, there are no obvious or immediate rewards to the tough decisions necessary to avoid future crises. in the world of financial stability, success is an orphan. that is why when the bank was fundamentally reformed after the crisis, the procedures and structures of the mpc were largely replicated in the bank ’ s two new policy committees, the fpc and the prc. crucially, all the bank ’ s committees have access to the bank ’ s information and analysis, all are well - informed about each other ’ s reaction functions and all can coordinate their policies when appropriate. the bank ’ s committees are independent but not isolated. the second lesson of the past two decades has been the importance of the flexibility in flexible inflation targeting. while the inflation target applies at all times, the remit has always acknowledged that inflation may deviate temporarily from the target on account of shocks. since 2013, it has explicitly recognised that in exceptional circumstances, bringing inflation back to target too rapidly could cause undesirable volatility in output and employment. in exceptional circumstances like today when the economy is facing profound structural change, the mpc can extend the horizon over which it returns inflation to target from above in order to balance the effects on jobs and activity. after all, even though monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the eu, it can influence how this hit to incomes is distributed between job losses and price rises. this brings me to my final point : while carefully circumscribed independence is highly effective in delivering price and financial stability, it cannot deliver lasting prosperity and it cannot solve broader societal challenges. this bears emphasising because in recent years a host