Mr Tucker says that, although financial markets have recovered considerably over the past year, the environment for financial firms is not hazard-free. Future exchange rate movements and the path of global interest rates are the main current uncertainties. Looking at options prices and what they might reveal about market uncertainty, Mr Tucker suggests that, although there is evidence that monetary policy has become more credible than in the past, there is also evidence of greater uncertainty about the path of future nominal interest rates, especially in the United States. Mr Tucker says there is likely to be modestly greater uncertainty when official interest rates are materially away from their neutral level, when there is "not only that uncertainty about future shocks but also uncertainty about how, absent shocks, the central bank would return to neutral".
Published on
29 January 2004
Press release