Both the macro and the asset pricing literature seem to have understood the importance of taking time-varying long-run equilibria into account, but a coherent treatment within macro finance models would be desirable. [35] And a third theme is an improved modelling of cross-country interrelations: this pertains to a more refined understanding of the workings of quantitative easing in a currency union, but also to the spillovers of policy-induced yield curve changes across different currency areas. [36],[37] Finally, one question is whether changes in long-term rates that are due to changes in the risk-less rate versus the term premium have similar effects on spending and the economy. On these and other topics concerning the interplay between monetary policy and the yield curve, I look forward to learning from new academic research – including the future contributions of the UCL research community. Thank you for your attention. [1] I am grateful to Wolfgang Lemke for his contribution to this speech. [2] On how to measure the risk-free rate in the euro area appropriately, see European Central Bank (2014), “Euro area risk-free interest rates: measurement issues, recent developments and relevance to monetary policy”, Monthly Bulletin July. [3] Some of the long time series shown in Chart 1 are from Jordà, Ò., Knoll, K., Kuvshinov, D., Schularick, M. and Taylor, A. M. (2019), “The rate of return on everything, 1870–2015”, The Quarterly Journal of Economics, 134(3), pp. 1225-1298. [4] Today, I will not discuss the potential non-policy drivers of the secular downward trend in rates that I mentioned earlier.

Our non-standard measures of negative interest rate policy and asset purchases brought down the overall level of the yield curve to a region that is, by definition, unreachable under a zero lower bound and contributed to a considerable flattening of the term structure. The lowering and flattening of the yield curve in turn eased financing conditions for non-financial corporations and households, contributed to spurring economic activity and helped bring inflation closer towards our aim. From an analytical perspective, further study of the impact of innovative monetary policy measures is a necessity for central bankers and an opportunity for academics. While academic researchers have the  privilege of being able to watch new policy measures unfold before scrutinising their impact, central bank researchers and decision-makers have to monitor the impact of policy in real time, and are forced to rely on sparse empirical evidence, especially if the policy measure is unprecedented. There are many open issues regarding the interplay between the yield curve and monetary policy that require further research in my view. So let me finish with a little wish list or research agenda. First on the list should be a better understanding of the role of term premia in macroeconomic models. This includes a more thorough analysis of the transmission of quantitative easing through the duration channel, but also, more generally, a better integration of long-term rates in the transmission mechanism as formalised in DSGE models. [34] Second is an improved modelling of long-term trends.