housing services have increased at an above - average pace recently. see pp. 8 – 9 of the february 2016 monetary policy report ( board of governors, 2016 ). see blanchard ( 2016 ) ; blanchard, cerutti, and summers ( 2015 ) ; and kiley ( 2015b ). bis central bankers ’ speeches surveys of consumers have edged lower over the past year or two with the level in february nearly 1 / 2 percentage point below the 10 - year average. three - year inflation expectations in the new york federal reserve ’ s survey of consumer expectations have also moved steadily lower over the past two years, though the recent decline in energy prices may explain much of this drift. notably, market - based measures of inflation compensation based on treasury inflationprotected securities ( tips ) and nominal treasury yields are at historically low levels. at the five - year, five - year - ahead horizon, inflation compensation is 1 percentage point lower than mid - 2014 levels. declines in swap - based measures of inflation compensation have been similar. however, these declines appear correlated with oil prices, and it is not clear to what extent these declines reflect a change in inflation expectations, changes in investor demand for tips versus nominal treasury securities, or an improvement in the risk characteristics of nominal treasury securities versus other assets. over the next couple of years, there are reasons to expect energy prices and the dollar to eventually stabilize, output to increase at around the moderate pace it has averaged over the recovery thus far, foreign growth to recover somewhat, the u. s. labor market to improve further, and inflation to move toward our 2 percent target. however, there are risks around this baseline forecast, the most prominent of which lie to the downside. for example, china faces risks as it navigates a sharp slowing in its goods sector, a large buildup in corporate debt, and an apparent surge in demand for foreign assets, although china possesses resources to deal with these challenges. more broadly, sources of robust demand around the globe are few, and sources of weakness relatively greater, as evidenced by persistently below target inflation in all of the major advanced economies. monetary policy in today ’ s circumstances, policy could usefully follow two simple guidelines. first, we should not take the strength in the u. s. labor market and consumption for granted. given weak and decelerating foreign demand, it is critical to carefully protect and preserve the progress we have made here at home through prudent adjustments to the policy path. tighter

andrew g haldane : capital discipline remarks by mr andrew g haldane, executive director of the bank of england, based on a speech given at the american economic association, denver, colorado, 9 january 2011. * * * the views are not necessarily those of the bank of england or the interim financial policy committee. i would like to thank tamiko bayliss, paul bedford, samuel knott, priya kothari, salina ladha, vasileios madouros, clare rogowski, victoria saporta, rhiannon sowerbutts, marco spaltro, george speight, belinda tracey, paul tucker, matthew willison and peter zimmerman for comments and contributions. the basel committee sets capital standards for international banks. there are now three vintages of these standards : so - called basel i dating from 1988, basel ii dating from around 2004 and basel iii which was agreed at the end of last year. 1 these international capital standards are supported by three pillars. pillar i defines the regulatory rules, pillar ii provides scope for supervisory discretion, while pillar iii seeks to foster market discipline through disclosure. in countering systemic shocks, three supporting pillars have understandably been felt to be better than one. but the success of international capital standards in forestalling banking distress has been mixed. basel i regulatory rules were arbitraged due to their risk insensitivity. this gave rise to basel ii with its greater focus on risk calibration. but basel ii buckled under the weight of the recent crisis. repairs have since been applied through basel iii. historical experience suggests this is unlikely to be the end of road. this paper assesses and suggests means of improving the robustness of this regulatory framework. the quest for risk sensitivity in pillar i rules caused regulatory complexity and opacity to blossom. this may have inhibited the effectiveness of supervisory discretion and market discipline ( section 1 ). in consequence, pillar i may have borne too much of the load and pillars ii and iii too little. here i focus on pillar iii. there may be straightforward ways to rebalance the basel scales, re - injecting market discipline. having banks issue a graduated set of contingent convertible ( “ coco ” ) securities, which are responsive to early signs of market stress, is one possible way of doing so ( sections 2 and 3 ). that would have the practical effect of reinforcing pillar i with pillar iii, so delivering a potentially