Monetary policy and financial dislocation - speech by David Miles

In a speech delivered to the Royal Economics Society, David Miles – External Member of the Monetary Policy Committee – reviews what can be learned from past asset purchases and what that implies about the impact of more asset purchases now.
Published on 10 October 2011

David Miles begins by noting just how long the financial crisis has lasted. “That crisis began in August of 2007, became intense in the autumn of 2008 and has not subsided yet. It is over four years since Northern Rock failed in the UK – that is today about as far in the past as the outbreak of the First World War was from the signing of the Armistice.” Banking sector problems across much of the world – particularly within Europe - have recently resurfaced. Bad news has arrived on a number of fronts since the August Inflation Report was published. The international growth outlook has worsened and in the UK output surveys have deteriorated markedly, employment growth has slowed and consumer confidence has fallen. Financial market sentiment has also deteriorated considerably. David Miles argues: “Whether the marked deterioration in financial markets and business and consumer optimism will last is hard to know...But monetary policy needs to be set in real time...Right now the likely future levels of UK inflation pressures look to me materially lower than in August.” This is why the decision was taken to embark on £75 billion more of asset purchases.

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