But it is possible that the increased proportion of households on fixed rate mortgages means the full effect of 15  See Hansen and Sargent (2008)  Bank of England  Page 15  policy takes longer to come through and/or is larger when it does, such that inflation comes down more quickly through 202316. Given the uncertainties we face it is important also to be humble about what we don’t know or still have to learn. I favour a watchful and responsive approach to setting policy17. Although my bias is towards further tightening, if the economy develops differently to my expectation and persistence in inflation stops being a concern, then I would consider the case for reducing Bank Rate, as appropriate. Conclusion Let me conclude with two salutary tales. First a personal one. In a speech I gave in February 2022, I repeated the MPC’s collectively agreed line that some further modest tightening was likely to be appropriate in the coming months. I stressed the word modest as being significant and went on to say that “I do not envisage Bank rate rising to anything like its pre-2007 level of 5%, let alone to the kind of levels we used to see before the MPC was formed in 1997”. That speech was on 22 February, two days before Russia’s invasion of Ukraine. Given the experience of the last year, we have to expect and plan for there being further shocks and be ready to respond accordingly. Second a historical one.
Meetings such as this Conference provide an excellent opportunity to strengthen the links between central bankers and academics. I wish you a very productive meeting and a pleasant stay in Madrid, expressing my gratitude for your attendance to this First Annual Research Conference of the Banco de España. Thank you very much for your attention. 4/4