Sarah Breeden: Two sides of the same coin - delivering monetary and financial stability timelessly

Speech by Ms Sarah Breeden, Executive Director for Financial Stability Strategy and Risk of the Bank of England, at the University of Leeds, Leeds, 9 March 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

As I stand in front of you – ambitious students with your careers ahead of you – I can't help but reflect on the three decades since I was sat in your position as an economics undergraduate, wondering whether and how I could put my studies to use. I've spent those decades at the Bank of England, a period of huge change for the institution.

An early highlight was working in the Governor's office in 1997, which you may know saw the creation of an operationally independent Monetary Policy Committee (MPC), tasked with maintaining price stability, via an inflation target set by the Government. Prices had been far from stable in the 70s and 80s, so this new institutional arrangement – adopted in the UK and elsewhere – was welcome and indeed resulted in a long period of low, stable inflation. The MPC's remit is broadly the same today – it aims to return inflation to the 2% target while avoiding unnecessary economic costs.

Another critical event was the Global Financial Crisis (GFC), which had similarly fundamental implications for the Bank. One lasting image of that crisis is of queues outside branches of a high street bank – Northern Rock. I worked on the Bank's response – providing liquidity support to Northern Rock as depositors withdrew their cash. In the event that was just the beginning of the crisis. One year later, the US investment bank
Lehman Brothers had defaulted and confidence in the financial system had collapsed. As a consequence we saw a credit crunch and economic costs on a huge scale.