Both eyebrows were raised. This was bad news. In central bank circles at the time, the double eyebrows was career-defining for all of the wrong reasons. Most of my subsequent 25-years has been managing that decline as gracefully as possible. Fifteen year later, I returned to pre-MPC on the other side of the table. There was now no cigarette smoke, but otherwise the format of structured presentations remained the same. Indeed, most of the main MPC processes remain much the same as at inception. That, I would say, is a sign of success. While MPC procedures have evolved for the better, and the standard of presentations I now receive is far-higher than those I used to give, the foundations of the MPC have remained essentially unmoved. It is no coincidence that durability in monetary policy processes has been accompanied by improved macro-economic outcomes. Since 1992, inflation has averaged 2% - exactly in line with target (to one decimal place) and 6 percentage points lower than in the preceding 25 years. The volatility of output has fallen by around half over the same period.6 Contrary to everyone’s expectations, inflation-targeting has lasted and delivered a twin-win, with greater stability on both the nominal and real sides of the economy.7 Given the UK’s previously chequered monetary history, this truly is a transformation. Of course, there is a question about how much of this improved performance reflects good luck rather than good monetary management.
7  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  7  This we are now seeing, with price surges across a widening array of goods, services and asset markets. At present, this is showing itself as pockets of excess demand. But as aggregate excess demand emerges in the second half of the year, I would expect inflation to rise, significantly and persistently. There are already some signs of this risk being priced in financial markets. Longer-term financial market measures of UK inflation expectations have picked up to stand around 30 basis points above levels over the past decade. There is no evidence so far of inflation expectations, in the UK or elsewhere, becoming durably or significantly de-anchored from target – for example, among households or businesses. But it is early days. Overall, inflation expectations and monetary policy credibility feel more fragile at present than at any time since inflation-targeting was introduced in 1992. Why do I say that? By the end of this year, I expect UK inflation to be nearer 4% than 3%. This increases the chances of a high inflation narrative becoming the dominant one, a central expectation rather than a risk. If that happened, inflation expectations at all maturities would shift upwards, not only in financial markets but among households and businesses too.