Monetary Policy

Sam Christie and Aniruddha Rajan Sudden contractions in credit supply can trigger and amplify recessions – a reality made painfully clear by the 2008 global financial crisis (GFC). However, quantifying these real economic effects is challenging. In this post, we demonstrate a novel way to do so using Granular Instrumental Variables (GIV), focusing on the … Continue reading GIV us some credit: estimating the macroeconomic effects of credit supply shocks →

Danny Walker, Dong Lou, Gabor Pinter and Semih Üslü Government bond yields tend to drift higher in the days before monetary policy or data news in the UK. Over the past two decades this tendency – which we label ‘pre-news drift’ – has pushed up on yields by 2 percentage points in total over that … Continue reading Why do government bond yields drift when news is on its way? →

Rishi Khiroya and Lydia Henning If you asked people what skill they would most love to have, you might receive answers like ‘to fly’, ‘to be invisible’ or even ‘predicting the future’. If you asked people who worked in financial markets in particular, ‘accurately predicting the future’ would probably be top of the list. From … Continue reading Fossicking in the dark or twenty-twenty foresight? →

Michael Salib and Mesha Ghazaleh The Bank’s monetary policy objectives are some of the most significant objectives bestowed by Parliament on any UK public authority. They are to maintain price stability and, subject to that, support the Government’s economic policy, including its objectives for growth and employment. In our paper we offer a historical and … Continue reading The Bank of England’s statutory monetary policy objectives: a historical and legal account →

Natalie Burr In economic theory, expectations of future inflation are an important determinant of inflation, making them a key variable of interest for monetary policy makers. But is there empirical evidence to suggest monetary policy can help determine inflation expectations? I answer this question in a recent paper by applying a Bayesian proxy vector autoregression … Continue reading Shaping inflation expectations: the effects of monetary policy →

Misa Tanaka Today the Bank published the 2025–28 ‘Bank of England Agenda for Research’ setting out the key areas for new research over the coming years and a set of priority topics for 2025. Misa Tanaka works in the Bank’s Research Hub and is the Bank’s Head of Research. If you want to get in … Continue reading Launch of the 2025–28 Bank of England Agenda for Research →

Before Bank Underground goes off on its Christmas holidays, it’s time for the Annual Bank Underground Christmas Quiz! We hope you enjoy testing your knowledge on our festive themed questions on economics, finance and all things central banking… If you want to get in touch, please email us at bankunderground@bankofengland.co.uk or leave a comment below. Comments will only … Continue reading The Bank Underground Christmas Quiz 2024 →

Nicolò Bandera and Jacob Stevens How should the central bank conduct asset purchases to restore market functioning without causing higher inflation? The Bank of England was faced with this question during the 2022 gilt crisis, when it undertook gilt purchases on financial stability grounds while inflation was above 10%. These financial stability asset purchases could … Continue reading Stable gilts and stable prices: assessing the Bank of England’s response to the LDI crisis →

Rebecca Mari and Matteo Ficarra. Floods are the most costly natural disaster in Europe. In the UK, they account for around GBP1.4 billion in annual losses. Yet, evidence on the macroeconomic implications is inconclusive. GDP often shows a puzzling delayed response, and prices can be pushed in opposite directions. Using a novel county level data … Continue reading Weathering the storm: the economic impact of floods and the role of adaptation →

Boromeus Wanengkirtyo, Francesca Diluiso, Rebecca Mari, Jenny Chan, Ambrogio Cesa-Bianchi and Alex Haberis. Climate change is becoming increasingly important for monetary policy as the world transitions into greener economies and climate change’s physical impacts become more prominent. This is complementary, but distinct to, examining how climate change affects financial stability risks (Carney (2015)). This series … Continue reading Climate and monetary policy series →