Michael Kumhof and Mauricio Salgado-Moreno While ‘unconventional’ balance-sheet policies like quantitative easing (QE) and quantitative tightening (QT) appear to have been successful, it is difficult to separate their macroeconomic and financial stability implications from those of other polices. Hence, in a recent paper, we develop a theoretical framework, focusing on the central bank’s liabilities, that … Continue reading Central bank balance sheet policies and the market for reserves
Monetary Policy
David Glanville and Arif Merali Short term interest rate (STIR) futures are the bedrock of interest rate markets, used to price expectations of central bank policy rates and other UK rate derivative markets such as swaps and options (see Figure 1). They are key for the transmission of monetary policy and provide an avenue for … Continue reading Caring for the ‘future’
Jenny Chan, Sebastian Diz and Derrick Kanngiesser In recent years, increases in global energy prices have posed significant challenges for net energy importers such as the UK or the euro area. In addition to the inflationary impact, increases in the relative price of energy imply a decline in real incomes for the energy importers. In … Continue reading Monetary policy in a gas-TANK
Derrick Kanngiesser and Tim Willems This post describes a systematic way for central banks to employ past forecasts (and associated errors) with the aim of learning more about the structure and functioning of the economy, ultimately to enable a better setting of monetary policy going forward. Results suggest that the Monetary Policy Committee’s (MPC’s) inflation … Continue reading Forecast accuracy and efficiency at the Bank of England – and how forecast errors can be leveraged to do better
Tomas Key Nominal wage growth has increased markedly in the UK in recent years, reaching levels that haven’t been seen for more than 20 years. Although growth has moderated a little in recent months, it remains significantly above its pre-pandemic level. An assessment of whether this strong rate of wage growth will persist is a … Continue reading Using sectoral data to estimate the trend in aggregate wage growth
Julian Reynolds Policymakers and market participants consistently cite geopolitical developments as a key risk to the global economy and financial system. But how can one quantify the potential macroeconomic effects of these developments? Applying local projections to a popular metric of geopolitical risk, I show that geopolitical risk weighs on GDP in the central case … Continue reading Quantifying the macroeconomic impact of geopolitical risk
Natalie Burr, Julian Reynolds and Mike Joyce Monetary policymakers have a number of tools they can use to influence monetary conditions, in order to maintain price stability. While central banks typically favour short-term policy rates as their primary instrument, when policy rates remained constrained at near-zero levels following the global financial crisis (GFC), many central … Continue reading To the lower bound and back: measuring UK monetary conditions
Samuel Smith and Marco Pinchetti Recent events in the Middle East, as well as Russia’s invasion of Ukraine, have sparked renewed interest in the consequences of geopolitical tensions for global economic developments. In this post, we argue that geopolitical risk (GPR) can transmit via two separate and intrinsically different channels: (i) a deflationary macro channel, … Continue reading The transmission channels of geopolitical risk
Tim Willems and Rick van der Ploeg Since the post-Covid rise in inflation has been accompanied by strong wage growth, interactions between wage and price-setters, each wishing to attain a certain markup, have regained prominence. In our recently published Staff Working Paper, we ask how monetary policy should be conducted amid, what has been referred … Continue reading Markup matters: monetary policy works through aspirations
by Brian Czech
If you recognize the damages done by a bloating economy, you’ll be alarmed by the global GDP meter, which hit the existentially menacing threshold of $100 trillion in 2022. If that doesn’t give you a dose of distress, try the global debt clock. Then, for a dizzying dose indeed, check the casino-like combination of debt and GDP maintained by “US Debt Clock.”
Almost all readers,
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