Only a minority of those with mortgages have ever experienced a rise in borrowing costs. Fewer still have significant inflation in their lived experience. Easy money is always an easier decision than tight money. But an asymmetric monetary policy reaction function is a recipe for a Minsky mistake. Having followed the right script on the way in, central banks now need to follow a different script on the way out to avoid putting 30 years of progress at risk. Financial Stability  The Bank has been bedevilled by bouts of financial instability since its inception. After I joined, these continued with the failures of BCCI and Barings. Each met with a ratchet response - more regulation, more regulators. At root, what these failures illustrated was a structural flaw in policy: the Bank was being asked to look in two directions at once, as both regulator of, and promoter of, the City. Both are useful roles. But giving one institution both roles invites failure when, as inevitably happens, the wrong balance is struck. Looked at now, firm failures in the 1980s and 1990s, and the cluster of small banks in the 1970s, were not close to being financial crises of the scale and severity we would recognise today. Certainly, none of them were systemic in their impact, either for the financial system as a whole or the wider economy. Contagion was short-lived and limited. And few losses of job or GDP resulted.
With the arrival of the Monetary Policy Committee (MPC) in 1997, the number of published speeches trebled. And with the advent of the FPC and PRC, Bank publications have kept going through the gears. In 2020, the Bank issued 62 speeches, 56 working papers, over 100 consultation documents, 74 blogs and around 100 statistical releases - in total, around 500 publications. That is around four million words - a genuine revolution in transparency practices. Transparency is necessary for central bank success, but not sufficient. The “twin deficits” of public understanding and public trust need also to be tackled.34 These deficits are closely linked as the public are unlikely to trust something they do not understand. Alongside a greater quantity of communication, tackling these deficits requires a shift in the nature of central bank communications to boost understanding and in the degree of central bank engagement to build trust. Both of those shifts are now underway. On public understanding, in surveys around 60% of the general public believe the Bank of England has a good understanding of the economy. That is the good news. The bad is that the same surveys suggest only around a quarter of the public believe the Bank explains its actions and decisions in ways they understand. Given the transparency revolution that has taken place, how can that be? Which of those four million words are people not understanding? 34  Haldane (2017a). 19  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  19  The answer is most of them.