And more broadly, following the 2008 financial crisis debt deflation has been the dog that hasn’t barked (Chart 4).8 But we shouldn’t rest too easy – there are several reasons why the dog might have just been sleeping, and central banks need to be vigilant against the risk that recent low inflation stirs it from its slumber. 2. Global factors and domestic inflation  Low global inflation matters for the UK because we are an open economy. Around one-third of the goods and services consumed by UK households are imported, creating a direct channel from global influences to UK prices. And the UK’s exports are around 30% of GDP, opening an indirect channel through which global activity affects costs and prices in the UK through demand for our products. The importance of these channels has waxed and waned over decades, with changes to both the degree of global integration and the conduct of monetary policy. Under the Bretton Woods system of fixed exchange rates prevailing until the early 1970s relatively closed financial and goods markets may have contributed to lower cross-country co-movements between inflation rates (Chart 5 (a) – see annex). After Bretton Woods collapsed, countries’ inflation rates became more highly correlated across the advanced world as they lacked the strong nominal anchors necessary to manage global cost shocks and subsequent attempts at disinflations (Chart 5 (b) – see annex).9 That situation persisted until the early 1990s ushered in the era of Inflation Targeting (Chart 5 (c) – see annex).
John Gieve: Stability and change Speech by Sir John Gieve, Deputy Governor of the Bank of England, to the Engineering Employers’ Federation North West, Warrington, 20 July 2006. *  *  *  I am delighted to be here today. The Bank of England has long connections with this region. We first set up offices in Manchester and Liverpool back in 1820s. That was a time when North West of England was a key hub in an emerging international economy, with the Port of Liverpool providing the gateway for industry in Lancashire and Cheshire to trade with the rest of the world, particularly textiles. The structure of the economy in the North West has of course changed markedly since those days and the region is now more associated with the aerospace, defence and pharmaceuticals industries than with textiles. Here as elsewhere, recent years have been a time of rapid change in the structure of industry and the economy. We may have been talking about globalisation for years but that doesn’t mean it is complete; in fact it is still gathering momentum. Macroeconomic stability: a platform for change In the face of that rate of change, it may seem paradoxical that among central banks the last 10 years have been known as the “Great Stability”. The UK is an example of that. Since 1992, when an explicit target for inflation was first introduced here, inflation has been stable and very close to its target.