Its independent, external scrutiny of the outlook for the public finances will bolster the credibility of the process, thereby helping to add stability in what is a volatile environment at present. The need for a balance between, on the one hand, targeted and timely action on other dimensions to complement monetary policy decisions (which, by nature, have a broader and more medium-term impact) and, on the other hand, wider respect for the institutional framework for macro policy, also arises in the context of actions taken by the Bank and other actors to support the functioning of financial markets for financial stability purposes. Monetary policy works through the financial system. Monetary policymakers therefore have a stake in liquid and well-functioning markets as vehicles for the transmission of their policy decisions. More widely, the Bank of England as a whole has an obvious interest in maintaining orderly markets that support healthy price formation and an efficient allocation of capital and resources. The Bank also has a statutory responsibility for financial stability, which it takes very seriously. In the face of dysfunction that has emerged in some specific market segments in recent weeks, the Bank is conducting a set of temporary and targeted financial stability operations to support the gilt market. Their goal has been to permit an orderly deleveraging of positions held by so-called liability driven investment (LDI) funds, which became vulnerable in the volatile market conditions we have seen of late.
Likewise, we cannot be specific today about the design of the “final” post-crisis operational framework. Before  8  BIS Review 51/2010  deciding on this, we will need to consider thoroughly the lessons to be learnt from the crisis. However, the operational framework that prevailed prior to the turmoil seems to provide a good benchmark. It served us well prior to the crisis, and could be adapted quickly as circumstances worsened. Concluding remarks Let me conclude. There is no doubt that the crisis will leave us a heritage of severe macroeconomic imbalances. Dealing with them will represent one of the most daunting challenges for policymakers in modern history. Against this backdrop, let me emphasise that the Governing Council will continue to deliver on its mandate, which is to maintain price stability over the medium term. All our decisions regarding an exit from supportive measures need to be seen within this context. As regards fiscal policies, it is essential to prevent public finances from running out of control. Clearly, this will require a very ambitious fiscal consolidation effort. In particular, as regards the consolidation strategy, and given that the tax burden is already high in many countries, the fiscal adjustment will have to be primarily expenditure-based. Finally, let me stress that any call to reduce the real value of public debt through higher inflation will be firmly opposed by the ECB. A low and stable level of inflation is a prerequisite for confidence, stability and sustainable growth. Thank you.