Paul Tucker explains that global monetary and financial stability has continued despite the significant increase in oil prices over recent years. Central banks and financial markets might have feared a much worse outcome. Central banks have responded by seeking to ensure that medium-term inflation expectations remain anchored. He explains that UK monetary policy has had to grabble with the interplay of cost shocks, and the consequent volatility in headline inflation, with demand conditions. UK monetary conditions have been edging towards being ‘restrictive’, which has been appropriate as firms gain greater pricing power. Paul Tucker says his future interest rate votes “… will depend on balancing the medium-term prospect for demand pressures alongside uncertainties about supply conditions and near-term inflation expectations… ”.