Contents of the Quarterly Bulletin
Each article is available as a separate pdf file; click on the appropriate title to access the relevant file. Alternatively you may download the complete issue.
Complete issue (2.13MB)
By Tom Fish and Roy Whymark of the Bank’s Notes Directorate.
Cash is often in the media spotlight. While some predict its impending demise, most people continue to use banknotes in their day-to-day lives. Although consumers are less likely to use cash for transactions than they were in the past, aggregate demand for banknotes is increasing. This article considers how cash usage has evolved in recent decades, how cash is used today, and why the Bank of England needs to prepare for a future where cash remains important.
A short video discusses some of the key topics from this article.
By Lucy Chennells and Venetia Wingfield of the Bank’s Resolution Directorate.
During the financial crisis, several governments bailed out failing financial institutions because letting the firms fail and enter insolvency would have caused excessive disruption to the critical services that these institutions provide and to the wider financial system. Following the crisis, the framework for managing the failure of financial firms was reformed and a new tool, known as bail-in, was developed. Bail-in allows the authorities to make sure that shareholders and creditors of a firm bear the costs of failure, without recourse to public funds.
By Andrea French and Mathieu Vital of the Banking and Insurance Analysis Division, and Dean Minot of the Insurance Policy Division.
Insurance companies play an important role in supporting economic activity. But insurers are exposed to a number of risks and can become distressed or fail. This article considers a number of channels through which insurance companies could have adverse effects on financial stability, including: how insurer distress or failure might disrupt the provision of critical services to the real economy; and how their behaviours can propagate systemic risk in the financial system. The Financial Policy Committee has an ongoing workplan to assess the extent of risks to financial stability from insurance companies’ activities.
By Fernando Eguren-Martin and Nick McLaren of the Bank’s Macro Financial Analysis Division.
Macroeconomic data releases receive considerable attention in financial market commentary, suggesting they are an important source of information that investors use to form their views about the economic outlook. This article quantifies the role played by these data releases in explaining observed changes in market interest rates in the United Kingdom. It looks at which data releases — both domestic and foreign — tend to have most effect on UK interest rates. It also examines how the importance of data releases can change over time and considers the factors that may explain changes in the sensitivity of interest rates to data news.
By David Elliott of the Bank’s Sterling Markets Division and Joseph Noss of the Bank’s Capital Markets Division.
The Bank uses a variety of methods to extract information about market participants’ expectations of the future path of Bank Rate. This article examines some techniques for estimating, using market prices, market expectations of the timing of future changes in Bank Rate and the probability of Bank Rate being changed within a given period of time. These techniques are useful because the expected timing of changes in Bank Rate cannot be directly inferred from the mean expected path of the level of Bank Rate.
By Arshadur Rahman of the Bank’s Financial Market Infrastructure Directorate.
Over-the-counter (OTC) derivatives markets have grown significantly over recent decades, and the United Kingdom is an important international centre for them. These markets facilitate the hedging of risk, but they can also give rise to complex exposures within the financial system. Following the financial crisis, policymakers have promoted reforms to these markets. These include the greater use of central counterparties (CCPs) to ‘centrally clear’ transactions, managing risk within the system. The concentration of risk within CCPs does however highlight other challenges, including the need for supervisory co-operation internationally. Authorities are working to address these issues.
Recent economic and financial developments
This article reviews developments in financial markets between 3 June and 3 September 2015 and describes the Bank’s own operations within the Sterling Monetary Framework.
Summary of the thirteenth Monetary Policy Roundtable hosted by the Bank of England and the Centre for Economic Policy Research (CEPR) on 25 June. There were two topics of discussion: what are the global drivers of inflation? And why are real interest rates so low?