Much of these data were granular enough to differentiate economic effects across the income, sector and geographic distributions. 10 The fourth and final set of issues involves the interaction of pre-pandemic structural trends with cyclical developments. The recent global shocks have deep implications for previously identified structural trends such as secular stagnation and the shifting relationship between technology and jobs. Workers’ increased reliance on remote solutions during the pandemic probably accelerated the digitization of tasks, which in turn has broader implications for income distribution and productivity growth, as well as the property market. In contrast, other structural trends may have been somewhat arrested by recent events; for example, pandemic and geopolitical disruptions injected fresh fragmentation impulses to the world economy and possible unmoored economies from their previous low inflation equilibria. 11 These four issues—the complex nature of shocks, along with the appropriate policy response, labour market effects and interactions with pre-pandemic structural trends— are key pivots that confront the global economy. And they will each have some hearing at this year’s Forum. Prof Viral Archarya started us off last evening with an astute and realistic assessment of the global landscape before us and the vulnerabilities that lurk in financial market adjustments, drawing in insights from his research. 12 For the Policy Note session on “Labour Market Policies after COVID-19”, our speakers are Professor Eric French and Professor John Haltiwanger, two eminent labour economists whose work central bankers have always paid close attention to.

But monetary policy can not – and should not – seek to prevent those adjustments. They are necessary for the long-run stability of our economy. Rather the job of monetary policy – and of public policy more generally – is to ensure that these adjustments occur in an orderly manner and within an economic environment which is consistent with hitting the 2% inflation target. Because it is new and untested, there is understandably considerable nervousness about the Monetary Policy Committee’s asset purchase programme – a.k.a. quantitative easing. How is it supposed to work? Will it work? The essence of the asset purchase programme is to increase the supply of money and credit in the economy. An important point to stress is that the success of the programme does not depend on banks returning to a position in which they are able to lend normally. The policy works by supplying money directly into the economy, not through the banks. Much of the money is being injected by purchasing government bonds from institutional investors, such as insurance companies and pension funds. These purchases encourage investors to switch their portfolios away from gilts into corporate bonds and equities, so improving the supply of credit to businesses. Companies’ access to credit is further enhanced by the Bank’s purchases of commercial paper and corporate bonds, which improve the functioning of these markets. But is it working? The objective of the asset purchases is to increase the growth of nominal spending.