Persistent low inflation could signal that the equilibrium interest rate – the rate consistent with inflation at target and the economy operating at full capacity – is lower than currently assessed, and therefore the stance of monetary policy is tighter than intended. Here again, trade tensions and wider economic policy uncertainties are relevant as both could reduce the equilibrium interest rate. 11 If so, that monetary policy space could be more limited in some jurisdictions, increasing the desirability that fiscal policy supplement it if a downturn materialises. Chart 10: Market measures of long-term inflation expectations drifting down in US and euro area Per cent 3.0  Per cent 4.0 UK adjusted (lhs)  3.8  UK (lhs)  3.6  2.8 2.6  3.4  2.4  3.2  2.2  3.0 Euro area (rhs)  2.8  US (rhs)  2.0 1.8  2.6  1.6  2.4  1.4  2.2  1.2  2.0 Jul. 16  1.0 Jan. 17  Jul. 17  Jan. 18  Jul. 18  Jan. 19  Sources: Bloomberg Finance L.P., and Bank calculations. Notes: The chart shows 5-year inflation 5 years ahead. The UK series has been adjusted higher to account for the fall in inflation swap rates that took place on 17 January following publication of the House of Lords Economic Affairs Committee Inquiry into the use of RPI. See ‘Real interest rates and risk’, speech by Gertjan Vlieghe at the Society of Business Economists’ Annual conference, 15 September 2017.
In the case of Hong Kong, where the financial industry is so critical to the economy, this obviously carries even more importance. Now, as a survey has found, we are fortunate in Hong Kong to have one of the highest levels of consumer trust in banks and financial services compared to other places.3 But we’ve seen in the financial crisis how fragile trust can be. So we need to guard against complacency, and work towards ensuring that Hong Kong remains a beacon to the rest of the global financial services industry. Whether one is a financial institution, a financial regulator or a consumer, this is in all our interests. So, how do we get there? In short, my argument this morning is that we will do so by recognising the interdependence of these three groups. Each has a role to play, but each also needs the help of the others. And, I would argue, at the heart of this interdependence lies effective consumer protection and education. I would like to discuss briefly each group in turn – first, the role of financial institutions. “The role of financial institutions” As I alluded to just now, financial-services institutions have a direct interest in upholding the reputation of the industry as a whole. I believe success in this regard rests on two pillars. First, nurturing a culture of honesty among practitioners. Second, an absolute commitment to  1  Mr André Laboul, Head of the Financial Affairs Division, OECD and Chairman of the International Network on Financial Education.