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Home > News and Publications > Summary of Quarterly Bulletin 2009 Q2

Summary of Quarterly Bulletin 2009 Q2

12 June 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 (3.7mb).

Recent economic and financial developments
Markets and operations (1.6mb)
This article reviews developments in sterling financial markets since the 2009 Q1 Quarterly Bulletin up to 22 May 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.

Quantitative easing (378k)
By James Benford, Stuart Berry, Kalin Nikolov and Chris Young of the Bank's Monetary Analysis Division and Mark Robson of the Bank's Notes Division.
The Monetary Policy Committee's recent decision to expand the money supply through large-scale asset purchases (or 'quantitative easing') shifted the focus of monetary policy towards the quantity of money as well as the price of money. With Bank Rate close to zero, asset purchases should provide an additional stimulus to nominal spending and so help meet the inflation target. This should come about through their impact on asset prices, expectations and the availability of credit. However, there is considerable uncertainty about the strength and pace with which these effects will feed through. That will depend in part on what sellers do with the money they receive in exchange for the assets they sell to the Bank of England and the response of banks to the additional liquidity they obtain. The MPC will be monitoring a range of indicators in order to assess the impact of its asset purchases and therefore judge the appropriate stance of monetary policy.

Public attitudes to inflation and monetary policy (734k)
By Alina Barnett and Ozlem Oomen of the Bank's Monetary Assessment and Strategy Division and Venetia Bell of the Bank's Inflation Report and Bulletin Division.
According to the Bank/GfK NOP survey, near-term inflation expectations have fallen markedly over the past year from elevated levels. In part, that may have reflected a reduction in households' perceptions of current inflation. But it is also likely to have reflected weaker demand prospects. Longer-term measures of inflation expectations were a little higher in May than in February. Households' perceptions of the current level of interest rates have fallen, as both borrowing and saving rates have declined. Households report that they expect interest rates to rise over the year ahead. The net balance of respondents satisfied with the performance of the Bank has fallen over the past year. That may reflect concerns about the economic outlook and the financial crisis.

The economics and estimation of negative equity (432k)
By Tomas Hellebrandt of the Bank's Monetary Assessment and Strategy Division, Sandhya Kawar of the Bank's Systemic Risk Assessment Division and Matt Waldron of the Bank's Structural Economic Analysis Division.
Negative equity occurs when the market value of a house is below the outstanding mortgage secured on it. As house prices fall, the number of households in negative equity tends to rise. Between the Autumn of 2007 and the Spring of 2009, nominal house prices fell by around 20% in the United Kingdom. There are no data which accurately measure the scale of negative equity. Three estimates presented in this article suggest that around 7%-11% of UK owner-occupier mortgagors were in negative equity in the Spring of 2009, although for most of those households, the total value of negative equity was relatively small. The effects of negative equity can be painful for those households concerned. Negative equity can also have implications for both monetary policy and financial stability, which are discussed in this article. These effects are likely to depend on developments elsewhere in the macroeconomy and financial system.

A review of the work of the London Foreign Exchange Joint Standing Committee
This article reviews the work undertaken by the London Foreign Exchange Joint Standing Committee during 2008.

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