Indeed, the risk of sharp, Brexit-induced, slowdown seems to be a key factor holding the sterling yield curve at its current low levels, according to market participants. On this view, the sharp slowing of UK growth in the first quarter of this year could be the harbinger of things to come. And there are already signs of a sharp slowdown in big-ticket discretionary purchases by consumers, including houses, cars and household goods. If this persisted, it too could justify monetary policymakers staying their hand. It would be imprudent to add fuel to any contractionary fire with an early interest rate rise. A final factor which, at least in principle, could be used to justify a continuing accommodative monetary policy stance is the level of the sterling yield curve. This is remarkably flat and has become flatter over the course of this year, despite medium-term growth expectations being revised upwards. Only one rise in UK interest  21  Based on the average of the different indicators’ deviation from their estimated “inflation target-consistent” rates. These estimated target-consistent rates may not be an appropriate benchmark at the current juncture if the mix between domestically- and externallygenerated inflation consistent with overall inflation at target has changed over time. For example, the trade integration of China into the global economy in the 2000s dragged on core goods inflation prior to the crisis and this may not repeat itself. 22 Bank of England (2016).
Early identification of difficulties is fundamental in this context. Banks must proactively identify those customers who, despite temporary difficulties, have a viable business, for whom debt restructuring may be an appropriate option. 7  For those cases of non-viability, it is clearly necessary to promote ways of ensuring an orderly exit from the market. It is vital that banks envisage sufficiently prudent scenarios in their capital projections and be conservative when setting aside impairment provisions. In this respect, I have already pointed out that the easing in the third quarter in provisioning by Spanish banks does not seem prudent in the current circumstances. Allow me to conclude. The exceptional situation caused by the pandemic continues to evolve and, thus, so do the public support measures and the focus of our activities as supervisors. Without a doubt, the development of an effective vaccine would contribute decisively to clearing the medium-term horizon, eliminating the most extreme economic scenarios, although the short-term remains beset by uncertainty. As long as this uncertainty persists, our responsibility is to remain prudent. Thank you very much. 8