That tension between monetary and financial stability is best managed in a coordinated way in a single institution. The use of macroprudential tools can decrease the need for monetary policy to be diverted from managing the business cycle towards managing the credit cycle. This enhances the credibility of the inflation target. That in turn may reduce the need for sharp or persistent moves in interest rates, which themselves might threaten financial stability. Similarly, macroprudential policy can more effectively focus on its primary goal of systemic stability by recognising that, while it affects the economic cycle, it is not suited to managing it. Instead its effects on the economic cycle should – like fiscal policy – be taken into account in setting monetary policy, which is the primary and most effective tool of demand management. Taken together with the synergies from sharing information and analysis, these are strong arguments for operating monetary policy and prudential policy in the same institution. In the short time the Bank has been responsible for both, we have already seen the benefits of operating them in a coordinated way. For example, our forward guidance framework for monetary policy reflects a clear division of responsibilities. Although monetary policy has an important role to play in mitigating financial stability risks, it does so only as a last line of defence. This is important because vulnerabilities can emerge from a long period of unusually low interest rates, as complacency sets in about the future path of policy and asset prices.
Through our strategic plan, we will also increase the transparency of our work on financial stability. We will publish the results of regular bank stress tests. As with monetary policy, we also intend to publish more of the research and analysis underlying our policy choices. Over  21  See King (2005). BIS central bankers’ speeches  9  time, the financial sector will be better placed to anticipate our responses and as with monetary policy, increased transparency will make us not just accountable, but also more effective. Conclusion The first Mais Lectures launched the fight against inflation. With time and increased confidence policymakers would win that war only to lose the peace. As a consequence, George Osborne’s 2010 lecture heralded the return of prudential supervision and the introduction of macroprudential policy to the Bank of England. Today’s challenge is to create a macroeconomic environment that provides the basis for strong, sustainable and balanced growth, the economist’s equivalent of a land fit for heroes. This evening I have sketched how the Bank of England intends to makes its contribution. I am in no doubt that those who come after me will add to our collective knowledge of how best to coordinate the Bank’s vast array of policy levers to achieve our fundamental mission. An open and confident Bank will welcome such advice and criticism. Why? Because the need for broad macroeconomic management is not just an intellectual curiosity, but rather a reality that will persist for years to come.