As public servants they contribute every day to delivering our mission to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. The changes we are making public today will ensure they can continue to do that important work effectively. 7. Open about our business  The Bank’s balance sheet has been at the heart of the financial system for over 300 years, and remains our most important policy tool. The innovations and adaptations in recent years have meant that it has been central to the flexible and effective response to all of the major policy challenges faced by the Bank since the onset of the financial crisis. And I am sure it will be a vital part of everything we do in future. Over that period, we have re-learnt one of Bagehot’s lessons – that ambiguity is rarely constructive. Policy is at its most effective when it is clearly communicated. We have taken major steps to improve communications around our monetary policy decisions, the framework we use to provide liquidity to the financial system, and the way we use Market Intelligence. Those changes show that the Bank of England is not just “open for business,” we are also “open about our business.”  11  http://www.bankofengland.co.uk/markets/Pages/mireview.aspx.
The conundrum for consumers is a simple one: if consumer spending growth is to exceed 2 percent annualized on a sustained basis at a time when real disposable income growth is below 2 percent then this would require the household saving rate to decline persistently. But there is little reason to expect such a decline given that the current saving rate is at a level consistent with current level of household wealth relative to income. We have a chicken-egg problem. If the saving rate remains stable, then stronger consumption growth will require a pickup in income growth. But for income to rise, demand must increase. This suggests that there may need to be an impetus to growth from other sectors of the economy to generate a boost in consumer spending growth. One possible source is the housing sector. As noted earlier, housing starts are still quite low relative to what the country’s demographics should support in the long run. But there are two difficulties here. First, the strength of the housing recovery may be blunted by the recent rise in mortgage rates. For example, before last week’s partial reversal, the 30-year fixed mortgage rate had risen by about 120 basis points since May to more than 4½ percent.