debt? work on several fronts ”, speech delivered at the svd bank summit, berns salonger, stockholm, december 3, p. 2. bis central bankers ’ speeches stability concerns should be elevated significantly in monetary policy discussions. a more balanced assessment, in my view, would be that increased focus on financial stability risks is appropriate in monetary policy discussions, but the potential cost, in terms of diminished macroeconomic performance, is likely to be too great to give financial stability risks a central role in monetary policy decisions, at least most of the time. if monetary policy is not to play a central role in addressing financial stability issues, this task must rely on macroprudential policies. in this regard, i would note that here, too, policymakers abroad have made important strides, and not just those in the advanced economies. emerging market economies have in many ways been leaders in applying macroprudential policy tools, employing in recent years a variety of restrictions on real estate lending or other activities that were perceived to create vulnerabilities. 10 although it is probably too soon to draw clear conclusions, these experiences will help inform our understanding of these policies and their efficacy. promoting financial stability through a macroprudential approach if macroprudential tools are to play the primary role in the pursuit of financial stability, questions remain on which macroprudential tools are likely to be most effective, what the limits of such tools may be, and when, because of such limits, it may be appropriate to adjust monetary policy to “ get in the cracks ” that persist in the macroprudential framework. 11 in weighing these questions, i find it helpful to distinguish between tools that primarily build through - the - cycle resilience against adverse financial developments and those primarily intended to lean against financial excesses. 12 building resilience tools that build resilience aim to make the financial system better able to withstand unexpected adverse developments. for example, requirements to hold sufficient lossabsorbing capital make financial institutions more resilient in the face of unexpected losses. such requirements take on a macroprudential dimension when they are most stringent for the largest, most systemically important firms, thereby minimizing the risk that losses at such firms will reverberate through the financial system. resilience against runs can be enhanced both by stronger capital positions and requirements for sufficient liquidity buffers among the most interconnected firms. an effective resolution regime for sifis can also enhance

economy slowing down, but some slowdown was necessary at this point in the economic cycle in order to avoid an inflationary upsurge. and if in fact it proves to be as mild as most of the forecasts - including our own - suggest, it will be a huge improvement on anything we have seen at this stage in the cycle for decades. it is true of course that the economy may turn out to be weaker than in our central projection. that projection is the mpc ’ s very carefully considered view as to the most probable outcome, but there is considerable uncertainty around it ; and the risks are somewhat more on the down than on the upside. we don ’ t have a crystal ball. and we don ’ t pretend to know at all precisely just how things will in fact turn out - that ’ s why we publish our forecasts in the form of a fan with a wide range of uncertainty around the central case. the people to watch out for in this field are those who do claim to know precisely. what we have to do, in actually operating monetary policy is to monitor all the relevant evidence as it emerges for signs that the economy is proving to be either stronger or weaker than we expect, and modify our view of the prospect for inflation - and our monetary policy - in the light of that. and in that context i repeat the assurance, which i gave recently to the tuc in blackpool, that we will act symmetrically. we will be - have been - just as rigorous in reducing interest rates with the overall evidence pointing to the balance of risks to inflation on the downside, as we have been - and will again be - in raising rates with the evidence pointing to a significant or sustained overshoot of the inflation target. now there are those - perhaps even one or two of you here this evening - who regard this assurance as cold comfort. it misses the point - they say - because the present approach to monetary policy focuses too narrowly on inflation. what we want - they say - is a monetary policy which puts more emphasis on growth and employment. you hear this complaint not just in this country but increasingly these days in continental europe. i must say, president, that it leaves me totally bemused. what it suggests is that growth and price stability are seen as alternatives - you can have a bit more of one if you ’ re prepared to accept a bit less of the other. i must confess that i thought the debate had advanced beyond that point and that we