chart 2a : typical household energy bill smaller of ofgem energy price cap and energy price guarantee this next chart illustrates what is going on. the blue line on the left - hand chart shows the evolution of the ‘ typical ’ household energy bill. nobody actually pays the typical energy price bill, of course, but it has become an industry standard as a measure of what households pay on average. it is generally determined by ofgem ’ s cap on the price that energy suppliers can charge consumers. in turn, ofgem bases its calculation of the cap on the wholesale prices energy suppliers are expected to pay in european energy markets. since october, the cap has itself been capped by the government ’ s energy price guarantee ( shown in orange ). chart 2b : typical household energy bill smaller of ofgem energy price cap and energy price guarantee you can see that the typical energy price bill went up in a few big strides as russia ’ s assault on ukraine drove up wholesale energy prices. in october, as the energy price guarantee was put in place to moderate what would have been an even higher increase in ofgem ’ s price cap, the typical energy price bill was nearly twice as high as a year earlier. as shown in the right - hand chart, annual inflation in the typical household bill was nearly 100 %. even if electricity and gas only accounted for about 3½ per cent of the consumer price index, this increase had a big impact on the overall inflation rate : a 100 % price increase in 3½ per cent of the consumption basket adds 3½ percentage points to inflation. chart 2c : typical household energy bill smaller of ofgem energy price cap and energy price guarantee looking ahead, with the announced adjustment to the energy price guarantee, the typical energy price bill is set to rise further to £3, 000 in april. but to calculate the annual inflation rate at that point, we have to compare with the april 2022 bill, which had already risen significantly. because of this base effect, even if the bill itself goes up to a higher level, it goes up by less over a year than it did in october. the annual inflation rate therefore falls sharply from 96 % to 52 %. the contribution to consumer price inflation from the energy bill will nearly halve. chart 2d : typical household energy bill smaller of ofgem energy price cap and energy price guarantee looking further ahead, say to april 2024, the outlook is more uncertain. wholesale energy prices have come down markedly over

financial stability by around half. the timing was unfortunate. the financial system was riding a credit wave as banks ’ balance sheets and leverage ballooned. every major financial crisis in the past has been presaged by credit waves of this type. 16 but this time, it was said, was different. risk had been dispersed and diversified to the four winds, courtesy of an ever - more interconnected global financial system and ever - more sophisticated financial instruments. 17 the great moderation in the economy also meant finance faced fewer shocks than in the past. haldane and kruger ( 2001 ). fischer ( 1999 ). evanoff et al ( 2015 ). taylor and schularick ( 2012 ). greenspan ( 2002 ). all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice when it came to assessing risks to the financial system, unlike with monetary policy, there was no off - the - shelf model. in pursuit of one, i started looking to other disciplines for inspiration. from the mid - 2000s, i began discussion with a set of scientists – physicists, evolutionary biologists, epidemiologists – on the models they used to understand complex, adaptive systems. i was hoping they might provide some analytical clues when it came to modelling the complex, adaptive world of finance. i was in luck. there was a well - developed field of complexity science, with applications in most of the natural sciences and some of the social sciences. economics and finance was a notable exception. once i had retro - fitted these models to the financial system, i wrote a note and sent it to the governors in 2005. it was titled “ public policy in an era of super - systemic risk ”. it made some bold claims about financial system resilience, most of which jarred with the prevailing orthodoxy. 18 financial integration, it argued, was a double - edged sword. it was fantastic for risk - dispersal when the good times rolled. but interconnections could switch from friend to foe when shocks were large. connectivity then amplified, rather than dispersed, risk ; it spread contagion. the more connected the system ’ s nodes – the larger the number of “ super - spreaders ” - the greater this fragility. this “ robust - yet - fragile ” property of complex webs struck a cautionary note about the true stability of modern finance. 19 when it came to managing systemic risk