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Home > News and Publications > Summary of Quarterly Bulletin 2008 Q2

Summary of Quarterly Bulletin 2008 Q2

16 June 2008


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 (8.8mb).

Recent economic and financial developments
Markets and operations (1.7mb)
This article reviews developments in global financial markets since the 2008 Q1 Quarterly Bulletin up to the end of May 2008. 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.

Public attitudes to inflation and interest rates (768k)
By James Benford of the Bank's Monetary Assessment and Strategy Division and Ronnie Driver of the Bank's Inflation Report and Bulletin Division.
A key upside risk to the medium-term outlook for inflation stems from the possibility that a further period of above-target inflation could lead to persistently elevated inflation expectations. According to the Bank/GfK NOP survey, households' expectations for inflation over the next year have risen markedly. This article focuses on the factors which may have driven the increase, drawing on the results of some additional questions included in the February 2008 survey. It concludes that while the latest increases in households' inflation expectations could be consistent with recent macroeconomic data, increases in households' perceptions of current inflation may also have played some role. The article also summarises the public's attitudes to interest rates and the conduct of monetary policy.

Recent advances in extracting policy-relevant information from market interest rates (3.6mb)
By Michael Joyce, Steffen Sorensen and Olaf Weeken of the Bank's Monetary Instruments and Markets Division.
Market interest rates form an important part of the transmission mechanism of monetary policy. They also contain information about market expectations of future policy rates as well as attitudes to, and perceptions of, risk. Extracting and interpreting this policy-relevant information is not straightforward, however. This article describes recent advances in this field and how they can be used to shed light on the downward trend in long-term real forward interest rates and the upward trend in long-term inflation forward rates, both developments that have attracted the attention of policymakers.

How do mark-ups vary with demand? (399k)
By Clare Macallan and Miles Parker of the Bank's Structural Economic Analysis Division.
The Monetary Policy Committee's (MPC's) objective is to deliver price stability. In order to achieve that goal, it is necessary to understand how inflation reacts to economic events. In the long run, inflation is determined by monetary policy. But over a shorter time horizon, one important determinant of changes in inflation is the gap between the prices charged by businesses and the costs that they face: that 'mark-up' will influence how changes in demand relative to supply feed through into consumer price inflation. The evidence presented in this article suggests that mark-ups vary positively with excess demand. That will increase the sensitivity of inflation to changes in excess demand. But it could also increase the efficacy of monetary policy, since the level of excess demand is in part determined by the level of Bank Rate set by the MPC.

On the sources of macroeconomic stability (577k)
By Garry Young of the Bank's Monetary Assessment and Strategy Division.
In September 2007, the Bank of England hosted an international conference on the sources of macroeconomic stability. This article summarises some of the ideas and debates that were raised at the conference. It focuses particularly on the role of monetary policy in fostering macroeconomic stability and draws out some of the implications for policy and research. These issues are relevant to the current economic situation. The UK economy is likely to be better able to withstand the turbulence it is currently experiencing if the previous prolonged period of stability was caused by sustainable structural change and an improved policy framework.

A review of the work of the London Foreign Exchange Joint Standing Committee in 2007 (327k)
This article reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2007.

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