My Lord Mayor, Mr Chancellor, My Lords, Ladies and Gentlemen, May I join the Lord Mayor in welcoming you, Chancellor, to your first Mansion House Dinner? You have set a rapid pace in your first month in office, not least in your announcements this evening.
In previous years I have sometimes set this gathering a quiz question. Tonight I want to reverse the process by providing the answer and asking you for the question. The answer is 23, and later I shall ask you – to what question is 23 the answer?
Over the past year, there has been no slackening in the pace of economic and political upheaval. The financial crisis that began in 2007 is not yet over. Much of the recent market volatility reflects concerns about the ability of governments to service their own debt and provide assistance where necessary to weakened banking systems, especially in the euro area. Such risks have the potential to derail recovery and we cannot ignore them.
At home we face the challenge of ensuring recovery while rebalancing the economy, reducing the fiscal deficit, and reshaping the structure and regulation of our banking system. In playing its part to meet this challenge, the Bank of England has two priorities. Our first priority must be to maintain low and stable inflation. Of late there have been those who doubt our ability or willingness to meet the inflation target. In May, CPI inflation was 3.4%, and for much of the past three years has been above the 2% target. Over that period the rise in prices in excess of that implied by the target was around 3%. That can be accounted for by the direct impact on the price level of the fall in sterling’s effective exchange rate, of about 25%, which is supporting the rebalancing of the UK economy.
For the full speech see: http://www.bankofengland.co.uk/publications/speeches/2010/speech437.pdf
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