Inflation and energy prices In these ways the losses in credit markets are already contributing to slowing growth; the questions are by how much and for how long? The danger that they could turn a necessary modest slowdown into a deeper and more painful downturn is clear and, of course, that would dampen inflationary pressures. That was a key factor in my decision to vote for a cut in rates in November and December. But the current situation is complicated by emerging upside pressures on prices. This inflationary pressure is coming largely from outside the UK, reflecting in part increased demand from countries like China where output growth has been both rapid and commodity intensive. That has led to renewed strength in commodity prices (Chart 11), with oil rising as high as $ a barrel and some agricultural foods reaching record highs in dollar terms. This has already increased the prices of imported goods, and that effect has been amplified recently by the fall in sterling. In turn, it is putting upward pressure on the sterling prices set by domestic producers for crude oil and wholesale gas and electricity. And, in contrast to the past, demand from emerging economies may mean that commodity prices prove resilient to slowing growth in the industrialised economies. The appropriate monetary policy reaction to upside pressures on prices coming from outside the economy (such as an energy price shock) depends on how households and businesses react to that shock – in other words, on so-called “second-round” effects.
Eddie George: Financial stability and the City the evolving role of the Bank of England  Speech by The Rt Hon Eddie George, Governor of the Bank of England, at the London Chamber of Commerce Conference, held in London, on 13 June 2000. *  *  *  Thank you, Chairman. I’m pleased to take part in this Conference, and to share the platform this morning with Gavin, but also with Howard Davies my long-standing partner in crime - or perhaps I should say in crime prevention. You ask me to talk about the evolving role of the Bank of England, in relation to financial stability in particular, which I’m happy to do. In fact it is rather easier to talk confidently about our role these days since it is now more clearly defined. A remarkable thing about the earlier legislation - the 1946 Bank of England Act - was that it made no mention of the Bank’s essential “raisons d’être” - what we were there to do. It seems to have been taken for granted that everyone knew what our role was. But about a decade ago we decided to define our core purposes more precisely for ourselves, primarily for internal management reasons. We identified three core purposes. The first two: –  the maintenance of monetary stability; and  –  the maintenance of the stability of the financial system are key objectives of central banks pretty well everywhere.