23 A “Brexit break” could also be associated with a material depreciation of sterling, putting upward pressure on inflation. In this case, the appropriate reaction of monetary policy would be ambiguous, and it is possible that tightening, rather than loosening, may be warranted. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  rates is fully priced in between now and late-2019. Forward rates only reach 1% by 2023 and, remarkably, never reach 2%. Given these expectations, any rise in interest rates in the immediate period ahead would come as a surprise to financial markets and, perhaps to a lesser extent, consumers and businesses. Because people dislike nasty surprises, this increases the chances of an outsized response in spending or in asset prices, perhaps even one which catalysed a “Brexit break”. This is a risk which, even if it is remote, is not easily dismissed. Taken together, these factors – real, nominal, financial - make the case for maintaining the MPC’s current, accommodative, monetary policy stance. And, until recently, it was those factors which weighed most heavily with me when framing my own view on the appropriate monetary policy stance. The Case for Tightening One of the keys to good policymaking is regular and critical self-examination of your arguments. This devil’s advocacy can help expose soft spots in your policy judgement, especially at times when the data and the risks around the economy may be altering.
On behalf of the Supervisory Board I would like to thank Lilja Steinþórsdóttir for our pleasant work together. In her place, the Supervisory Board appointed Stefán Svavarsson Chief Auditor. Financial institutions compete fiercely for talented employees, which is not surprising given the pace at which the Icelandic banks’ activities have expanded. It is vital for the Central Bank to have as capable employees as possible in its service. It must take prevailing conditions into account to ensure that this is the case. On the Supervisory Board in 2006, Ólafur G. Einarsson resigned from the post of Chairman which he held since 1998. Helgi S. Guðmundsson was elected Chairman in his place. On behalf of the Supervisory Board I would like to thank Ólafur G. Einarsson for his particularly successful leadership during his years as chairman. The Supervisory Board held 22 meetings during the year. I would like to thank the members of the Supervisory Board for their pleasant cooperation and fine work. I also thank the Board of Governors and employees of the Bank for their very good work during the year and fruitful collaboration with the Supervisory Board. 2  BIS Review 34/2007