But at the same time the Chancellor confirmed the Bank’s continuing responsibility for the stability of the financial system as a whole, so that in fact what this has done - as in relation to monetary policy - is to distinguish and clarify the respective roles: of the Bank, which now focuses upon systemic risk - and retains its lender of last resort role within parameters that are broadly defined by the legislation; of the FSA which oversees both the prudential and business conduct of all individual financial institutions, including the banks, with the emphasis on consumer protection; and the Treasury, which has ultimate responsibility for both these dimensions. The new arrangements make a good deal of sense in the UK context where traditional distinctions between banks and other types of financial institution have progressively eroded and where there has been a general movement towards greater consumer protection across a much broader front. But at the same time as clarifying our respective responsibilities, and providing in each case for transparency and separate accountability for the way in which they are carried out, the new legislation recognises the vital importance of close coordination between them and establishes a framework for that. It is early days to assess the effectiveness of these arrangements, but my impression is that so far they are working well.
However, the purchasing managers’ index has fallen more than expected, which indicates that the slowdown may be greater than estimated (see Figure 10). The labour force survey statistics show that the labour market continued to improve in June. Employment rose by just over 2 per cent, compared with the same month last year, and unemployment fell, when seasonally-adjusted, to 7.5 per cent. This was a marginally smaller  2  See Carmen M. Reinhart and Kenneth S. Rogoff, “This time is different: eight centuries of financial folly”, SNS, 2010. BIS central bankers’ speeches  3  improvement than we were counting on in July (unemployment 0.1 of a percentage point higher). CPI inflation was 3.3 per cent in July. CPIF inflation (1.6 per cent) and CPIF inflation excluding energy (1.1 per cent) were much lower. All of these outcomes were marginally (0.1 of a percentage point) lower than expected. I said at the monetary policy meeting in July that there was still a risk that inflation would increase more than we were expecting, particularly in 2012 and 2013. This was partly because inflation had recently been held back extra hard by the strengthening of the krona. I also pointed to the risk of rising energy and commodity prices in the world market, higher wage increases than expected due to pressure in the labour market, and higher inflation and wage expectations due to the high CPI inflation. But so far, inflation has been marginally lower than expected and energy and commodity prices have fallen.