Where there is uncertainty about the level of R-star, the scenario shows the advantages of setting policy rates on the one-step-at-a-time basis embodied in difference rules. Policies that attempt to move quickly back to preconceived neutral levels without reference to the real time evolution of the data run the risk of adding noise and volatility through a mis-calibration of the policy response.25  Monetary policy outlook Coming back to last week’s monetary policy announcement, the MPC agreed to continue with a further modest tightening of monetary policy. Placing the specifics of that decision in a longer context, since I joined the MPC in September we have: (1) retired the forward guidance that signalled unchanged policy rates; (2) brought asset purchases to an end; (3) started to raise Bank Rate and continued that process last week; and (4) announced a start to the reduction of asset portfolios accumulated as a result of QE. From a starting point of substantial policy accommodation, this is a consistent, measured and resolute set of actions intended to rebalance the stance of monetary policy and address the inflationary pressures that have emerged. 12  All speeches are available online at www.bankofengland.co.uk/news/speeches  12  We have signalled that more is to come in the coming months if the path sketched out in our February forecast plays out. But equally we have flagged that the outlook for Bank Rate beyond the coming months is uncertain, reflecting the two-sided risks to inflation at the policy-relevant two to three year horizon.
The board of directors must have full and direct access to the heads of the internal control functions (risk management function, compliance function and internal audit). In other words, the interaction between the board of directors and the heads of the internal control functions should not have to go through an intermediary level of executive management. Reporting to the board should be supported by agile internal systems capable of producing reliable information to facilitate meaningful discussion and effective decision-making processes. Overall, the internal audit and risk management functions are more mature in their functioning than the compliance function, whose role has changed/increased in recent years. There is therefore more room for improvement in the compliance function. The main focus areas identified by the SSM related to internal control functions are: (i)  the board’s challenging capacity and ownership in addressing deficiencies. (ii)  in most SSM institutions, the heads of the internal control function have direct access and report any concerns directly to the board of directors, in line with the EBA guidelines on internal governance. However, the frequency and level of detail of the information provided is also a focus area. (iii)  the right balance between sufficient involvement and independence. (iv)  the stature of the control functions, with the internal audit function performing better and the compliance function worse or even inadequately. (v)  the central steering and oversight of the control functions of group subsidiaries.