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Home > News and Publications > Summary of Quarterly Bulletin 2012 Q3

Summary of Quarterly Bulletin 2012 Q3

13 September 2012
Contents of Quarterly Bulletin 2012 Q3 

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.
Recent economic and financial developments
Markets and operations (266k)
This article reviews developments in sterling financial markets, including the Bank’s official operations, between the 2012 Q2 Quarterly Bulletin and 24 August 2012.  The article also summarises market intelligence on selected topical issues relating to market functioning, including the most recent results from the Money Market Liaison Group survey of the sterling money market, and market participants’ responses to an increased need for collateral.
Research and analysis
Research work published by the Bank is intended to contribute to debate, and does not necessarily reflect the views of the Bank or of MPC members.
RAMSI:  a top-down stress-testing model developed at the Bank of England (72k)
By Oliver Burrows, David Learmonth, Jack McKeown and Richard Williams of the bank's Risk Assessment Division.

Top-down stress testing is one way of assessing the resilience of the financial system to the risks it might face now or in the future.  The Risk Assessment Model of Systemic Institutions (RAMSI) developed at the Bank of England is an example of a top-down stress-testing model and is part of the Bank’s risk assessment toolkit.  This article offers an overview of RAMSI and illustrates its use in the stress tests carried out during the IMF’s 2011 UK Financial Stability Assessment Program.

What accounts for the fall in UK ten-year government bond yields? (2.7mb)
By Rodrigo Guimarães of the Bank’s Macro Financial Analysis Division.
Financial market measures of future interest rates and inflation rates can provide useful and timely information for policymakers.  Recent advances in yield curve modelling have improved the Bank’s capacity to extract policy-relevant information from these market measures.  Such models suggest that the fall in the yield on UK ten-year nominal government bonds since the onset of the financial crisis largely reflects lower expectations of real interest rates at shorter horizons, consistent with an expectation that policy rates will remain low for some time.  The model estimates also indicate that inflation expectations have been relatively stable, and suggest that there are no signs that they have become less well anchored. 
Option-implied probability distributions for future inflation (244k)
By Tom Smith of the Bank’s Macro Financial Analysis Division.
Beliefs about future inflation play a major role in determining the rate of inflation, and so it is important for the Monetary Policy Committee to take them into account when making their policy decisions.  A number of measures of central expectations for inflation are available, such as surveys of inflation expectations or measures derived from financial markets.  But until recently far fewer measures of beliefs about the full distribution of possible future inflation rates have been available.  This article describes a new method for producing option-implied probability density functions for future inflation, which can be used as a measure of that distribution, and examines the recent rise in uncertainty about future inflation that they reveal.
The Bank of England’s Real-Time Gross Settlement infrastructure (74k)
By Andrew Dent and Will Dison of the Bank’s Market Services Division.
The Bank of England operates the United Kingdom’s Real-Time Gross Settlement (RTGS) infrastructure for the settlement of electronic sterling transfers.  This infrastructure plays a vital role in the safe functioning of the UK financial system and in fulfilling the Bank’s core purposes — maintaining monetary and financial stability.  This article explains the role of the RTGS infrastructure, how it operates, and how it reduces risk in the UK financial system.  It also outlines how the design of the infrastructure will develop in the coming years.
The distributional effects of asset purchases (172k)
In its report on the 2012 Budget, the Treasury Committee highlighted the redistributive impact of monetary policy, and asked the Bank, and MPC members in particular, to improve their efforts to explain the costs and benefits of their policy actions to groups that are perceived to have been particularly badly affected.  This report forms part of the Bank’s response.
Monetary Policy Roundtable (34k)
On 14 June, the Bank of England and the Centre for Economic Policy Research hosted the eighth Monetary Policy Roundtable.  These events are intended to provide a forum for economists to discuss key issues pertaining to monetary policy in the United Kingdom.  As always, participants included a range of economists from private sector financial institutions, academia and public sector bodies.  There were two discussion topics:  prospects for household saving;  and cost, demand or uncertainty:  why has the level of business investment been so weak, and when will it pick up?