At the same time, in the MPC’s judgment, it did not yet herald a turn in the stance of monetary policy. I would like to expand on these developments today, including what they mean for the UK’s economic prospects. Since the Bank’s full powers came into force a few years ago, we have pursued a strategy: 1. To rebuild the resilience of the banking system;  2. To maintain an accommodative stance of monetary policy to achieve the inflation target and support the recovery; and  3. To develop and deploy a macroprudential toolkit to prevent the emergence of new vulnerabilities that could derail that recovery over the medium term. We’ve made determined progress in all respects. In particular, we’ve reached inflection points in micro and macroprudential policies, and are able to set out the requirements for one in monetary policy. In doing so, we have increased the prospects of a durable expansion. But the path of policy is not preordained, and continued progress will require both vigilance and dexterity. That’s because private and public balance sheets remain stretched. The global environment is unforgiving. And the supply side of our economy is still healing. Let me expand. 1. A resilient banking system  I will begin with the foundation upon which strong, sustainable balanced growth is built: a resilient financial system. The combination of a radical overhaul of the regulatory framework and years of determined effort has significantly strengthened the UK banking system.
For example, a “core” measure that relied exclusively on inflation in the services sector would have run above 2% in the pre-crisis era, when overall inflation was around 2%, in light of low inflation rates in goods prices. A “core” measure with a higher weight on goods prices would have shown the opposite. 22  For example, although they are uncertain, estimates of the pass-through of exchange rate movements to CPI inflation suggest that, on average a 1% appreciation reduces consumer prices by around 0.3%. Those effects take time, though they are mostly complete in around three years – consistent with complete but gradual passthrough of exchange rate changes to consumer prices. That likely reflects, among other things, rigidities in retailers’ pricing decisions. See the box on page 28 of the November 2015 Inflation Report for further discussion.