We also work closely with some of the organisations sharing the stage with me today, aiming to get the best result and to minimise the burden on industry. We work extensively with Pay.UK who are working to deliver change across the retail payment schemes through their New Payments Architecture Programme. Together, we are tackling issues such as whether we could build a shared Public Key Infrastructure (PKI) for UK payments. And of course payments globally continue to change apace, so we thrive on our engagement with other central banks on key topics such as standards harmonisation, where our close collaboration is a crucial part of how we can collectively transform the payments landscape. Working together provides the opportunity to learn, share insights and collaborate on common challenges. Conclusion  Just as payment systems are at the heart of the economy, industry engagement must remain at the heart of the Programme. User input enables us to create the platform and capability that industry needs to innovate: the building blocks to transform the payments landscape. But as we mobilise delivery at the Bank, we need industry to mobilise too. We are on track against our plan and we need firms to develop theirs – so the payments industry is ready to transition safely to the new service and maximise the opportunities for innovation and transformation promised. We are developing a strategy to work closely with Direct Participants to provide information, monitor key milestone completion, undertake testing and seek assurance that they are each ready to implement changes.
Unemployment would be materially higher and nominal wage growth materially lower. Ultimately, this reflects what is known as the “neutrality” of monetary policy: in the long run it has no impact on real economic variables (things like real output or relative prices). It can’t boost structural productivity, for example. Nor can it offset the consequences for real incomes of (say) disruptions to supply chains in Asia or Russia’s curtailment of the supply of gas to Europe. Indeed, in the first instance, at least for a period of time, tighter monetary policy lowers GDP and real incomes. I will say more about this shortly. For the time being, a better short-hand description is this: the pandemic and the war have led jointly to higher inflation and lower real incomes; the MPC will ensure the inflationary effects do not persist into the medium term; but the real-income hit exists either way, and will be reversed only to the extent the underlying shocks themselves go away. The second point I want to make is that we are inevitably having to learn, to some degree, about the scale of these “second-round” effects. The MPC has raised interest rates faster than at any time in its history but obviously more gradually than inflation itself. In the main, this is because the direct effects of the jumps in traded goods and energy prices, as violent  Bank of England  Page 6  as they are, are likely to fade before policy could really do much about them.