Low policy rates, it is argued, generate leverage in the economy and can lead to asset price bubbles. These concerns have particular relevance for me given my responsibility as the current Deputy Governor for Financial stability. On the face of it, this ought to bias me more to err on the side of a faster and sharper approach to policy. The evidence certainly seems to suggest that previous occupants of my post may have had such concerns about the impact of monetary policy on financial markets. Since the post was established in 1998, previous Deputy Governors for Financial Stability have never voted against a rate increase, and have frequently been in the minority in calling for one. 22  The difference, however, is that it was only in 2013, six months prior to my arrival, with the formal establishment of the Financial Policy Committee that the Bank was given specific macro-prudential tools to manage risks to financial stability. And since the establishment of the FPC, we have used those tools not just to increase the resilience of the financial system but also to restrain the build up of leverage in the economy more generally. 23  I am very clear that monetary policy can and should serve as the last line of defence against risks to financial stability, even though that can come at a significant cost to the broad economy.
I have noted before the much greater degree of attention to the supply side given by the post-crisis MPC 4  relative to its pre-crisis predecessors. This is clearly accounted for by the much greater inability to forecast the evolution of supply and its impact on inflation (Charts 3 & 4). 2  Mark Carney’s recent speech illustrates that bank rate might have risen by 2-3 percentage points between August 2013 and the end of 2014 if the post crisis MPC’s had followed the reaction function of its pre-crisis predecessors. And the important role that forward guidance played in preventing financial markets and real economy agents acting in expectation of such tightening. 3 Miles (2015) 4 The rate of mentions of ‘supply’ and ‘productivity’ in the minutes of MPC meetings in the past decade has been about twice that in the decade prior to the crisis.