Bank of England Staff Working Paper No. 624, available at https://www.bankofengland.co.uk/working-paper/2016/qe-the-story-so-far. The debate about the precise effects of QE continues; for two recent contributions by my MPC colleagues, see Vlieghe, J. (2018), “The yield curve and QE”, speech at Imperial College Business School available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/the-yield-curve-and-qe-speech-by-gertjanvlieghe.pdf, and Broadbent, B. (2018), “The history and future of QE”, speech at the Society of Professional Economists available at https://www.bankofengland.co.uk/speech/2018/ben-broadbent-society-of-professional-economists. 9 For more on the TFS see the information on the Bank’s website at https://www.bankofengland.co.uk/markets/quantitative-easing-andthe-asset-purchase-facility. The Bank also lent directly to banks via the Funding for Lending Scheme (FLS) in 2012, a scheme designed to incentivise banks to lend to the real economy at a time when bank lending growth had been persistently very weak, not least because of spillovers from the euro area crisis. But this was a fully collateralised scheme, classified as off balance sheet under a collateral swap arrangement. For more on the FLS see Churm, R. et al (2012), “The Funding for Lending Scheme”, Bank of England Quarterly Bulletin 2012Q4, available at https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2012/the-funding-for-lending-scheme.pdf. 5  All speeches are available online at www.bankofengland.co.uk/speeches  5  10  in wholesale markets. The latter is typically at a shorter term than the former, so this activity exposes banks to funding liquidity risk. Banks need to be able to take on this risk to execute their economic function. But it remains a risk nonetheless. Under ordinary circumstances, banks should largely be able to self-insure against this risk; indeed, that is a core part of effective bank risk management.

(2017), “Watching the Watchers”, speech at the GARP 18th Annual Risk Management Convention, New York. Available at https://www.bankofengland.co.uk//media/boe/files/speech/2017/watching-the-watchers-forward-looking-assessment-and-challenge-of-a-central-banks-own-financialrisk.pdf. 24 The details of the capital framework are contained in a Memorandum of Understanding between the two institutions, available at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/718481/The_Financial_Relationship_ between_the_Treasury_and_the_Bank_of_England_-_MoU_web.pdf. 25 See Carney, M. (2018), “New Economy, New Finance, New Bank”, Mansion House Speech 2018, available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/new-economy-new-finance-new-bank-speech-by-mark-carney.pdf. 8  All speeches are available online at www.bankofengland.co.uk/speeches  8  Where are we heading? Where does all this leave policy and the balance sheet through which it is implemented? In August 2018 the MPC voted to raise Bank Rate from 0.5% to 0.75%. That was based on our Inflation Report forecast, which showed that absent an increase in Bank Rate, the economy was likely to move into excess demand, and that the resulting wage pressures would push inflation above our 2% target. In September we then voted to leave Bank Rate unchanged at 0.75%. And looking ahead we expect that, if the economy continues to evolve, as it has done so far, broadly in line with our August forecast, then further limited and gradual rises in Bank Rate will be appropriate to return inflation sustainably to the target. As well as being the collective view of the committee, this is also my personal view, which is why I voted for an increase in Bank Rate in August. The signal I take from the labour market indicators is one of labour market tightness and rising pay pressures, which I expect to support inflation in the medium term.