A Perspective on Recent Monetary and Financial System Developments

In this speech, Paul Tucker, Executive Director, Markets and Monetary Policy Committee member, considers the risks facing the two elements of monetary stability - price stability and financial stability - after another year in which both were sustained. After explaining his January vote on Bank Rate in the context of the communication of monetary trategy, Mr Tucker characterised monetary conditions as 'edging towards restrictive', which provided the platform needed going forward to restrain inflationary pressures. Turning to financial stability, Mr Tucker contrasts the risks presented by global current account imbalances and compressed risk premia. In a world of what he calls 'vehicular finance' in which risk is transferred - if only contingently - beyond banks, he calls for market practitioners to work to continue to improve ex-ante measures, including via documentation and insolvency regimes, to handle periods of stress