In a speech last night to the Scottish Council for Development, he set out the challenges which could potentially act as “headwinds” to the recovery in the UK economy.

“First, the recovery of the UK economy will need to take place with a banking system which will not be firing on all cylinders.

“Second, the rebalancing of the economy means we cannot rely so heavily on the sources of growth which have powered the UK economy in the past decade – consumer spending
and financial and business services.

“Third, we should not be surprised to see continued volatility affecting our economic
lives as a result of global economic developments.”

He then noted that the backdrop to his time on the Monetary Policy Committee has been unprecedented global volatility – both affecting inflation, through oil and commodity prices – and economic growth – with the recession induced by the current financial crisis.

“We should not expect that we have seen an end to this global volatility which has its roots in the integration of world markets and the challenge of absorbing China, India and other emerging markets into the global economic system.

“One thing is essential, however. When the recovery does come, it needs to be
underpinned by a continuation of the low and stable inflation we have generally
experienced in the UK since the 1990s.

“That is a key responsibility for the Monetary Policy Committee. An underpinning of low inflation should help ensure that recovery can be sustained – which in turn is a key issue for business confidence and future prosperity in the longer term.”