BoE’s Bailey calls for stronger financial markets to absorb future shocks

Bank of England (BoE) Governor Andrew Bailey said on Thursday that financial markets need to be better prepared for future shocks and monetary policy must stay focused on bringing inflation back to target.

Policymakers should strengthen core financial markets so they can absorb future shocks without amplifying them.

Greater absorption of government debt has come with greater fragility.

When shocks become more frequent, underlying growth is weaker, and the succession of shocks leads to a higher level of government debt, it's much harder for governments to use balance sheets to cushion a severe downturn.

Monetary policy needs an unwavering commitment to returning inflation to target.

Evidence of pass-through of energy costs into broader inflation is currently quite subdued but there are risks.

We are seeing volatile markets.

Market movements are some way from normal, but we are not seeing illiquidity or stressed conditions.