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Home > News and Publications > Summary of Quarterly Bulletin 2009 Q1

Summary of Quarterly Bulletin 2009 Q1

16 March 2009


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 (2.3mb).

Recent economic and financial developments
Markets and operations (1.6mb)
This article reviews developments in sterling financial markets since the 2008 Q4 Quarterly Bulletin up to the end of February 2009. The article also reviews the Bank's official operations during this period.

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.

Price-setting behaviour in the United Kingdom:  a microdata approach (469k)
By Philip Bunn of the Bank's Structural Economic Analysis Division and Colin Ellis of the Bank's Monetary Analysis Division.
This article discusses recent work at the Bank of England using large databases of individual price quotes to investigate price dynamics in the United Kingdom. Understanding the dynamics of prices is important for policymakers concerned with meeting an inflation target. Based on price quotes underlying ONS aggregate price indices, consumer prices changed, on average, once every five months between 1996 and 2006, while producer prices changed once every four months between 2003 and 2007. Higher frequency supermarket price data covering the period from 2005 to 2008 suggest that prices change more often than this. There are considerable differences in the behaviour of prices between different types of products: for example, goods prices change more often than services prices. The individual price-level data are not clearly supportive of any one theory of price-setting.

Deflation (353k)
By Charlotta Groth of the Bank's External MPC Unit and Peter Westaway of the Bank's Monetary Analysis Division.
This article provides a brief review of issues relating to deflation. It explains what is meant by deflation, examines the historical experience and investigates what costs might be associated with deflationary episodes. It suggests that the adverse effects of deflation can be exaggerated by confusing the effects of the underlying shock with the effects of deflation per se. The costs of deflation itself are most likely to be associated with debt deflation and downward rigidities in money wages. By learning from previous episodes, it argues that deflationary episodes can be short-lived and less costly if policy responds promptly and decisively, employing the full range of conventional and unconventional monetary policy instruments.

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