Maintaining economic calm not possible, says MPC member

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The UK economy is perpetually subjected to shocks and pressures, rendering hopes of maintaining financial stability indefinitely "over-optimistic", Monetary Policy Committee (MPC) member Paul Fisher said last night.

Fisher, speaking at the University of Warwick, said the responsibilities of the incoming Financial Policy Committee (FPC) - detecting and reducing threats to the financial system - were a "tough ask".

He warned stakeholders against harbouring unrealistic expectations about what it can achieve.

"The UK economy is constantly subject to shocks and varying pressures, many of them from abroad, which cause fluctuations in economic activitym," he said.

"The job of policymakers is to recognise and assess such developments, and subsequently take actions to mitigate their impact.

"Once action is taken it then may need time - and we could be talking years - for the economy to respond fully. So expectations of maintaining financial stability continuously would be over-optimistic.

"Just as monetary policymakers will never be able to abolish the business cycle, financial policymakers will never be able to abolish the credit cycle.

"Instead, the best contribution we can make to financial stability is probably in making the system as a whole more resilient, so that the costs of any specific financial instability shocks are reduced."

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