Paul Tucker: Inflation, growth and stability - balancing the Bank of
England's economic priorities
Remarks by Mr Paul Tucker, Deputy Governor of the Bank of England, at The Institute of
Economic Affairs' 27th Annual Conference "The State of the Economy", London, 23 February
2010.
* * *
Many thanks for input to Peter Andrews, Roger Clews, Iain de Weymarn, James Proudman, Gareth Ramsay and
Victoria Saporta. For background work to Michael Grady and for secretarial support to Sandra Bannister and
Cheryl Feeney.
It is an understatement that the current macroeconomic conjuncture poses major challenges
for policy. There are also major lessons for the overall framework for preserving stability in
our economy. I shall talk about both.
Both the challenges and the lessons stem from the source of the crisis: a crash in the credit
system affecting a domestic and global economy which had become severely imbalanced.
Broadly, from the autumn of 2008 onwards, the sharp falls in economic activity were most
pronounced in areas heavily dependent on credit and optimism (Chart 1). There was a
vicious spiral down in world trade, where supply chains had become longer, with more
counterparty risk and so more dependence on credit. Likewise in industrial production
(Chart 2). Business investment collapsed (Chart 3). There was sharp destocking, helping to
alleviate firms' financial pressures.
Things are better than they were. Capital markets have mostly reopened, but spreads are
still higher than before funding markets deteriorated during 2007 and bank lending has been
very weak. World trade and manufacturing have bounced back, although remain below
precrisis levels. Confidence has revived, but may not yet be resilient. The rate of job losses in
the USA, the epicentre of the crisis, has slowed. But growth in the euro area, our largest
trading partner, has been less encouraging recently.
In the UK, against a backdrop of massive monetary stimulus, nominal demand grew in the
third quarter of 2009 for the first time for over around a year (Chart 4). And real output
recorded very slight growth in the fourth quarter. "Bumping along the bottom" - but a lot
better than might reasonably have been feared twelve months ago, when there was a
tangible risk of the economy sliding away into depression.
The outlook is better. As we said in the recent Inflation Report, gradual recovery is in
prospect. But it is still highly uncertain. As I have said before,1 I think it will take at least until
the middle of the year for us to have much of a sense of whether growth will be anaemic or
robust enough to begin to absorb the slack in the economy. That view is broadly consistent
with the MPC's latest collective forecasts, published a fortnight ago. The central thrust of
those projections is for growth in economic activity to revive quite quickly but for the level of
activity to recover slowly (Chart 5), which is what really matters for welfare. After spiking over
the next few months, inflation is, we believe, likely to drop below our 2% target due to the
downward pressures from a weak level of demand on wages and prices (Chart 6). But it is
then likely to climb back towards the target as the economy recovers. Compared with our
previous collective forecast last November, there are differences of nuance in the "most
likely" and "mean" paths for growth and inflation, but frankly to my mind those nuances are
small beer compared to the main risks. My take on those risks is that, on the downside, the
headwinds to demand and activity could prove stronger than currently foreseen. And, on the
upside, that we (and our peers) could prove too slow to withdraw monetary stimulus if animal
spirits revive across the economy or further spikes in inflation outturns raise medium-term
expectations. Meanwhile, the data are bound to be mixed.
Four aspects of the conjuncture
Against that background, I shall briefly review a handful of the issues that, one way or
another, the MPC will face over the coming months.
A balance sheet recession?
I have a good deal of sympathy for those who argue that the current downturn owes a lot to
stretched balance sheets - in the private sector, public sector, and the national economy as
a whole.
On average over the past decade the UK ran a current account deficit of around 2% of GDP,
increasing in the years immediately before the crisis. That is about double the post-war
average, but compares favourably with the United States, which had a deficit of around 5%
of GDP before the crisis. Sterling's depreciation has already boosted the UK's external
balance sheet, and net trade should benefit too over time.
Arguably, more serious imbalances were internal. Perhaps surprisingly, they did not show up
in unusually strong output or consumption growth, in contrast to the inflationary booms that
preceded earlier busts. In the five years leading up to the crisis, annual GDP growth
averaged around 21⁄2%, similar to the post-war "trend". Much the same was true for
household consumption growth, and its contribution to GDP even declined slightly during
2005-07. But, with slower income growth, the household saving rate actually fell throughout
this period. Household balance sheets expanded rapidly, with debt and house prices rising in
tandem. Access to cheap and readily available finance, and a willingness to borrow, led to
household debt rising to over 150% of annual income. That inevitably made the household
sector more vulnerable to adverse shocks; that is what leverage does!
But there were also important distributional shifts. One way of thinking about the rise in
house prices and increase in debt is as a transfer of wealth between older (house-seller) and
younger (buyer) generations. In balance sheet terms, the younger buyers were acquiring
housing assets and debt; and the older sellers were swapping free equity in houses for
financial assets. In consequence, for a while, the ratio of aggregate household debt to assets
remained fairly stable; and the ratio of financial and housing assets-to-income rose steadily.
Taken as a whole, households were vulnerable to falls in asset prices.
Households now face lower asset prices, somewhat lower house prices, tighter credit
conditions, a lower path of demand and output, rather less job security, and a much greater
sense of uncertainty. Younger households in particular have a strong incentive to save more
(Chart 7) to repair indebted balance sheets, or to accumulate the deposits that are once
again needed to buy a home (given banks' policies on loan-to-value ratios).
By contrast, taken as a whole, the corporate sector has been running a cash surplus
throughout - in the run up to the crisis, and since. Some of that is no doubt down to firms
having learned lessons from flirting with excessive leverage during the "telco" boom nearly a
decade ago. But quite a lot of the cash surplus has resided in oil companies and, since the
crisis, in financial firms, which face the task of gradually deleveraging and reliquifying. Given
how much debt banks will need to refinance or repay to the authorities around the world over
the next few years, the Bank is keen - as reflected in the recently published minutes of the
Chancellor's Council for Financial Stability - that individual banks agree indicative
refinancing plans with their supervisors; and that at least aggregate national conditions be
shared amongst international peers. That would help to avoid each bank thinking that it can
delay its effort, risking an almighty scramble in eighteen months or so when official-facilities
will be running off.
As household sector saving has risen and as banks have deleveraged, government
borrowing has increased very sharply as it helped to absorb the macroeconomic shock.
Without too much exaggeration, this can be thought of as a rescheduling of private sector
debt facilitated by the only balance sheet currently strong enough to bear it - HMG's. But,
like financial services, the public sector had accounted for an increasing share of measured
output in the run up to the crisis. And since a good deal of that was debt financed, this source
of support is not unlimited. Indeed, those two sectors have to be part of the process of
rebalancing demand and activity in the economy over the years ahead.
Overall, the rebuilding of balance sheets and the rebalancing of demand pose a downside
risk to the outlook for activity.
Effective supply, and inflationary pressures
Repair of balance sheets will affect the path of demand. What of supply?
There is a great deal of slack in the economy. Around three-quarters of a million jobs (net)
have been lost. And most surveys have firms working well within capacity (Chart 8). The
MPC believes that that will tend to bear down on wages and consumer price inflation over
the next few years, warranting our substantial monetary stimulus.
But the recession will obviously impair the economy's productive potential. Investment plans
have been shelved and some discouraged people are likely to leave the workforce. Those
effects are likely to accumulate over time. But there are important temporary factors too.
Typically when monetary policymakers talk about the potential supply of the economy, we
have in mind the slow-moving accretion in productive capacity determined by growth in
underlying productivity, the workforce and firms' net investment in the capital stock. Right
now, that mindset would not quite capture what is going on. There are a number of reasons
for thinking that the "effective supply" capacity of the economy has been depleted temporarily
due to the shock to credit supply and confidence (Chart 9). How much, and how temporary,
are major uncertainties.
In the months immediately after the Lehman crisis, the cutbacks in lending and in trade credit
insurance were so severe that some firms were probably unable to maintain production at
previous levels. Working capital is, after all, an intermediate input.2 Those constraints have
probably reduced over the months. But, given insipid and uncertain demand, not a few firms
seem to have temporarily suspended part of their capacity: whether by putting part of their
workforce on short hours or closing down a production line.
This makes it likely that supply conditions are going to depend heavily on the path of
aggregate demand. If demand recovers robustly, firms are likely to bring some capacity back
on line. If, on the other hand, demand proves anaemic, then suspended-capacity is more
likely to be permanently scrapped. Under the first scenario, inflationary pressures could be
weaker than would otherwise be the case in a recovering economy. Under the latter
scenario, inflationary pressures would be greater than otherwise in a stalled economy. I do
not want to go so far as saying that the path of aggregate demand won't affect inflation, but it
may not be quite as potent as usual.
Viewed more broadly, provided we do not take risks with inflation - as we must not and will
not - the robust-growth path would plainly be preferable as it would avoid wasteful
impairment of the economy's productive potential, and so of living standards in the years
ahead. To achieve the 2% inflation target over the medium term but at the cost of an
avoidable depletion of the economy's supply capacity would not be congruent with the MPC's
Remit, which includes supporting growth and employment in so far as that is consistent with
the overriding goal of price stability. I was glad that the "effective supply" way of thinking
about this was reflected in our latest Inflation Report. But I would readily concede that we
must not lose sight of the potential "speed limit" effects that featured in our November
Report. Given the need for some rebalancing in the pattern of demand and activity, and the
likely lags in firms bringing even suspended capacity back on-line, bottlenecks are a distinct
possibility. We will need to be especially alert to messages from the Bank's Agents, to survey
evidence, and to data on productivity, wages and prices for any sign of inflationary
pressures.
Volatility of inflation, and inflation expectations
The Committee's strategy has warranted maintaining the very substantial monetary stimulus
notwithstanding the marked pick-up in inflation over recent months. As the Governor
explained at our press conference a fortnight ago, we think that the recent rise in inflation is
accounted for mainly by the increase in petrol prices, the restoration of VAT to 17.5%, and
lagged effects of sterling's substantial depreciation. But we can't be, and aren't, comfortable
about it. Not least because the country has to trust us that these will be temporary
disturbances.
In the first place, our judgments about the pass through of the exchange rate depreciation
could prove to be wrong. Second, we are vulnerable to further upward shocks to commodity
prices if, for example, Asian growth remains robust, although I draw a degree of comfort from
OPEC's excess capacity at present. Third, we cannot rule out that there has been a greater
destruction of supply capacity than suggested by survey evidence, in which case underlying
disinflationary pressures would be weaker than thought. And fourth, it is possible that, given
still-tight credit conditions and an uncertain outlook for demand, some firms will take
opportunities to raise prices in order to buttress cash flows, notwithstanding their operating
within their potential capacity.
As ever, we must therefore interrogate the data and surveys, and we must be especially
sensitive to medium term inflation expectations (Chart 10). So far they have remained
broadly consistent with the target. Judging from options prices, financial market participants
seem to think that there has been a rising probability that inflation will overshoot substantially
on the upside. But there seems to be a perception of a roughly similar probability of an
overshoot on the downside (Charts 11a and 11b). The big picture is that the risks on both
sides tangible. The upside risk no doubt owes something to perceptions of the scale (and
are
manner) of our monetary stimulus. I must therefore underline that there is no dilution in our
commitment to the inflation target. This country suffered too much from the inflationary
booms and busts of the past for us to take risks on that score - in either direction.
QE: the stimulus to nominal demand, and the financing of the banking system
To avoid the downside risks, we need to help to revive the economy. And the monetary
stimulus is, of course, directed at a big deficiency of nominal demand in the economy. At our
latest monthly meeting in early February, the MPC maintained Bank Rate at 0.5% and the
stock of money injected via asset purchases at £200bn. The money market yield curve has
edged down slightly since then.
Over the past year my colleagues on the MPC have variously set out the key mechanisms
through which Quantitative Easing (QE) should work. I shall not go over all that ground
today, but there is unavoidable uncertainty about the speed and potency of QE's effects. I
am minded to think that some of the effects will come through fairly gradually. And therefore
I would stress that the monetary stimulus from QE has not stopped. The flow effect of our
bond purchases on gilt yields is not the beginning and end of how QE provides monetary
stimulus. Plainly the mechanisms through which our money injections affect the economy
differ in some respects from the transmission of changes in Bank Rate, which in an economy
with a lot of (net) floating-rate debt can affect household and business borrowers' cash flows
quickly. By imbalancing the asset portfolios of the institutional investors that sell us gilts, QE
works in part through shifting the risk premia (broadly defined) on a wider class of financial
assets. I would not expect that to be over and done with quickly.
An analogy: it is sometimes alleged that the boom leading up to the crisis was in credit
markets but did not really affect equity markets. I do not agree. Arbitrage does connect
markets - eventually. The boom in Leveraged Buy Outs was precisely a mechanism for
using underpriced debt to buy "cheaper" equity, which would have driven down the ex post
equity risk premium had it taken its course uninterrupted by the crash. Similarly now, the
effects of imbalanced investment portfolios will, most likely, spread through different capital
markets - and so into wealth and the availability and cost of capital - gradually.
A second mechanism, rather less remarked - except perhaps in international central banking
circles - is how QE here and the injection of money by other central banks effectively
contribute to the financing of the banking system. By buying assets from the non bank private
sector, we increase deposits with the banks: broad money. We also put extra reserves -
balances with the Bank - into the hands of the banks themselves. To the extent that those
reserves holdings exceed individual banks' demand for a liquidity buffer, they can use them
either to expand lending or, alternatively, to repay (maturing) debt, and so help to deleverage
their balance sheets. Another way of thinking about it is that, at an aggregate level, our
purchases reduce the scale of assets that the private sector needs to finance by borrowing
from the banks. This is not just a UK thing.
That being so, we should not be too surprised that there has been a sharp fall in the
utilisation of central banks' liquidity facilities during 2009. The size of central bank balance
sheets (Chart 12) remains much the same as about a year ago, just as QE was getting
underway; but the composition of our asset portfolios has changed. The bottom line is that
we are still providing an enormous amount of liquidity to the banking system as a whole, but
with revived wholesale money markets distributing that assistance to where it is needed.
So our monetary instruments and financial stability instruments shade into one another -
unsurprisingly. And that means that when planning our so-called exit strategies from
monetary easing, central bankers will need to weigh the effects on bank funding conditions,
which in turn affect credit conditions and demand in the economy.
Five issues for the policy framework for maintaining macro economic stability
I want to look beyond the immediate conjuncture. I don't plan to say anything today about
financial sector reform, but will concentrate on the overall framework for preserving
macroeconomic stability.
That there are lessons from the crisis is obvious.
Don't be seduced by the appearance of stability
The so-called Great Stability was, with hindsight, in some respects a surface phenomenon.
We should not lose sight of the absolutely vital achievement of establishing monetary policy
regimes that carry credibility with households, firms and markets. But, in terms of demand
and output, underneath a surface of smooth growth at the aggregate level lay horribly
imbalanced economies. And given the length of time this persisted, it may well have affected
the pattern of investment, and so led to a distribution of the economy's supply capacity that
would be out of line with better balanced demand. It is hard to tell.
I don't much like slogans, but the "Great Threat" might have been a galvanising refrain.
The monetary transmission mechanism: we must embed the renewed interest in
financial markets, money and credit
As Mark Carney, the Governor of the Bank of Canada, observed at Jackson Hole last
summer,3 economists developed a habit of thinking of the financial parts of the monetary
transmission mechanism as more or less fixed for practical purposes. But, in fact, the
evolution of the financial system - due to regulation, innovation, and animal spirits - can,
subtly or not so subtly, alter the ways in which our interest rate changes flow through to the
real economy. Twenty years ago there was great interest in this kind of thing, perhaps
reaching its apogee in the BIS's Cross Report4 on the effects of interest rate and foreign
exchange derivatives on monetary policy and macroprudential policy. Over the latest period,
we needed to take greater account of the implications of the credit-market revolution, the
emergence of major new financing markets, and declining credit and liquidity spreads.
What this amounts to is that, in assessing the outlook for demand and inflation, monetary
policymakers need routinely to take a greater interest in financial markets and their workings,
over and above looking at asset prices as an input to wealth and the cost of capital. This
means trying to make sense of risk premia and liquidity premia.5 Not easy, but it needs to be
done. And it will be important soon if there is a persistent rise in the margin that banks
charge for credit over and above the risk-free rate. It might plausibly rise due to a higher cost
of funds to banks themselves, a heightened assessment of risk of borrower default, or more
demanding future regulatory requirements. Indeed, not a few bankers have argued in recent
months that the international authorities should temper their regulatory reforms due to the
prospect of higher credit costs for households and firms. But there may be offsetting factors.
If in the steady-state equilibrium credit spreads were to be higher, then other things being
equal there might be a lower equilibrium risk-free interest rate.6 In plain language, the Bank's
policy rate might on average conceivably be lower in future than during the Committee's first
decade. We shall have to wait and see.
The counterpart to placing greater weight on the level of and fluctuations in risk premia is
being more attentive to money and credit quantities. There is plenty of such interest at
present of course, as evidenced by the number of mentions in the minutes of the MPC's
meetings. But we must ensure that interest is sustained.
And in a world of global banking and capital markets, that surely means looking at wider
measures alongside our normal broad money (M4) aggregates. It is surely not at all
uncommon these days for firms around the world to hold part of their currency liquidity with
banks overseas.
At the Bank, we have had another go7 at creating a wider measure of UK money growth that
takes account of international deposit-taking activity (Chart 13), and also at similar measures
of "world money growth" (Chart 14). In both cases, the swings over the past decade are
more pronounced on the wider measure, especially for the UK. I am particularly struck that
these aggregates start to pick up during late 2003, just about the time when the Bank's
3
Carney M (2009), "Some considerations on using monetary policy to stabilize economic activity", remarks to a
symposium sponsored by the Federal Reserve Bank of Kansas City, Jackson Hole, Wyoming.
4
See Bank for International Settlements (1986), "Recent innovations in international banking", prepared by a
Study Group established by the Central Banks of the Group of Ten Countries, known as the "Cross Report".
5
King M A (2006), Speech at a dinner for Kent Business Contacts in Conjunction with the Kent Messenger
Group/Kent Business, Ashford, Kent, 16 January, 2006.
6
My colleague David Miles discussed this in "The Future Financial Landscape", a speech given at Bloomberg,
16 December, 2009.
7
An earlier estimate of world broad money growth can found in Tucker P M W (2007), "Macro, asset price, and
financial system uncertainties", Bank of England Quarterly Bulletin, 2007 Q1, pp. 122-130. This version takes
into account resident foreign currency deposits and non-resident deposits with banks.
BIS Review 21/2010
market intelligence began to report a revival in financial market "animal spirits" after the telco
debt problems of 2002.8 Obviously these wider measures of money collapsed - and, again,
by more than the standard M4 measure - after the Lehman crisis.
Broader measures can tell us about domestic as well as global conditions, and this may be
especially important for the UK. The contraction in lending to our businesses and, to a lesser
extent, to our households owes a lot to withdrawal by foreign-headquartered banks
(Chart 15). Cross-border lending into the UK, particularly via syndicated lending, has shrunk.
And so has lending by branches and by many (but by no means all) subsidiaries of overseas
banks here. The same broad pattern seems to be true in other economies, but may be rather
less significant. There is an unusually large presence of non-UK banks here, due to our
hosting an international financial centre. The City is not purely an entrepot. It intermediates
between domestic saving and investment, as well as international flows of funds and risk.
And the connections into our domestic economy - via credit flows, as well as taxation - gives
us a vital macroeconomic interest in the health of global capital markets and the
international banking system.
"Mopping up" and missing instruments: macroprudential policy
I was always doubtful about the consensus around the authorities relying entirely on
"mopping up" by slashing interest rates after bubbles burst, and frankly, with hindsight, I wish
I had expressed my reservations more strongly.9 The mess created by this crisis - the cost
to businesses and millions of people around the world - surely puts beyond doubt that if,
using a wider range of instruments, we could tame the credit cycle, we should.
There is a debate about whether, around the world, monetary policy inflated the bubble.
Research economists will take a long time to reach anything like a consensus. But I would
make one observation today. The suggestion that I have heard most frequently from
thoughtful market participants is not that monetary policy was directly responsible for the
bubble, but that it contributed to an appreciation of asset prices which then got out of hand.
Any easing in monetary policy inevitably pushes up asset prices (compared with the
counterfactual) because it reduces the discount rate used to value the cash flows from
securities and the rental income on property. The more long-lasting a monetary easing is
expected by the markets to be, the greater the effect on asset prices.
In the early years of this century, those standard channels were powerfully at work around
the world, led by dollar markets. And they combined with the ex ante imbalance in global
savings and investment, which brought down yields on risk-free bonds. Big picture, all of that
was basically warranted by economic fundamentals. It did not itself constitute a bubble. But
bubbles often get going because, given risk illusion, market participants can extrapolate
forward into ex ante required returns the windfall ex post gains they have enjoyed. And, once
started, bubbles can keep going because a collective action problem - herding, to put it more
straightforwardly - can make it hard for any individual firm or fund to step off the dance
floor.10
The moral of this story is that the financial authorities need to be sensitive to when a marked
appreciation in asset prices is becoming fuelled by rapid credit growth and looks likely to get
carried away beyond anything warranted by fundamentals. Regulators need to be a bit less
disposed to find fundamental explanations for any degree of financial appreciation, and a
little more alert to market participants themselves saying, as many did, that risk is
underpriced. That does not of itself mean that monetary policy should be more timid in trying
to repair deficiencies in nominal demand. But it does underline the need, as I said a few
years ago, to take care that the remedy for one set of imbalances does not lead to another.
And this is especially important if, as would seem to be the case, monetary policy is capable
of generating prolonged periods of stability at an aggregate level that lead financial market
participants to believe mistakenly that the world is less risky than is actually the case.
It is all very well saying that the cognitive biases of economists and the authorities should
change slightly, and that our mindset should at times be a bit more lateral. But do we, in
actual fact, have any instruments for doing anything about threats to stability from credit
bubbles that are not associated with burgeoning nominal demand and inflationary pressures?
That is precisely what the "macroprudential instruments" debate is about. There is increasing
interest in these possibilities. The Bank of England's own November Discussion Paper was
only one manifestation. Another is the IMF's recent review of the macroeconomic policy
framework.11
The basic question is whether the authorities could lean against booms by
credit-fuelled
tightening capital or liquidity requirements for lenders or, as some economists have
advocated, by raising the amount of collateral that borrowers have to put up.12 In principle,
this could be aimed at aggregate or sectoral credit conditions, and it could have a goal of
making our banks more resilient. It would need to be pursued by executive agencies under
clear mandates from legislators, and it would benefit greatly from transparency. A painful
lesson for the Bank of England is that our warnings of "underpriced risk" and system-wide
fragilities in our Financial Stability Reports were perhaps admired by some but made no
difference. And, alongside our domestic and international peers, we are not in this for
plaudits! People - the markets, firms, households - take notice of our Inflation Report, MPC
minutes and speeches on monetary policy not, essentially, because they might sometimes
be interesting or well done, but for the simple reason that the MPC is the body that sets
sterling interest rates in the real world. If the authorities were able to deploy credible
macroprudential tools, their stability warnings would probably be taken more seriously in
future, because they would be able to follow up words with actions.
Monetary policymakers would need to be attentive to the use of such instruments, as they
would affect credit conditions. Such instruments would also help to underpin the consensus
that monetary policy should focus on the path of nominal demand at the aggregate level, with
macroprudential policy seeking to address over exuberance in particular sectors or in credit
markets generally and the resilience of the banking system.
Slow moving threats to stability: a continuing challenge
If the authorities could make a regime along those lines work in practice, we would reduce
one threat to stability: out-of-control credit booms that undermine the stability of the financial
system and so jeopardise the supply of credit that lubricates economic activity. I do think that
we should direct some of our energies to that, alongside making the financial system more
resilient in case, as is inevitable, "credit boom and bust" cannot be eliminated.
But I should flag that this would not wave away all potential threats to stability. A lesson of
this (and past) crises is that cumulative imbalances in the domestic and global economy
eventually come home to roost. That would surely have been so on this occasion even if our
banking systems had proved more resilient.
A great challenge for monetary policymakers everywhere is that external and internal
imbalances typically grow slowly, and that the timing and manner of their unravelling is highly
uncertain. In setting a course for nominal demand, we are usually trying to stabilise inflation
in line with our target over a horizon of 2-3 years. Of course we care about longer horizons.
As a number of us have argued over the years,13 that is nicely captured by approximating our
objective with a so-called quadratic loss function that gives weight to deviations of inflation
from target and deviations of the level of output from its sustainable course. In that set up,
the policymaker cares about future volatility (or uncertainty) about the inflation rate and the
"output gap". Sizeable imbalances create precisely that uncertainty, threaten precisely such
volatility.
All very useful as an abstract framework for thinking about policy. The trouble is that there is
not a policymaker anywhere who has much of a clue about how to operationalise it in actual
interest rate decisions. This matters because not all imbalances are associated with credit
booms that pose a threat to financial stability. The development of a set of macroprudential
tools would not be sufficient to insulate our economies from imbalances. But I do believe that
it is necessary.
Governments as insurers against aggregate instability: the importance of government
balance sheets
The Bank has said before and we shall carry on saying that no set of measures introduced
by