And as a purely non-traded good, housing isn’t affected as directly as business capital by the prospective changes in the UK’s terms of trade. So any impact of greater uncertainty may on this occasion take longer to come through. But I fear I’m already straying into the temptation I’ve warned against, to over-interpret incoming data. The wiser course is to wait for the November Inflation Report, which gives us a good opportunity to reflect more systematically on the news since August, and what it implies – if anything – for the medium-term outlook. Thank you. 13  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  13  References Bank of England, 2016, August 2016 Inflation Report, http://www.bankofengland.co.uk/publications/Documents/inflationreport/2016/aug.pdf Bank of England, 2012, “The distributional effects of asset purchases”, Quarterly Bulletin, 2012 Q3, http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb1203.pdf Bean, C., 2012, “Pension funds and quantitative easing”, speech given to the National Association of Pension Funds’ Local Authority Conference, http://www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2012/speech573.pdf Bernanke, B., 2015, “Why are interest rates so low?”, Brookings, https://www.brookings.edu/blog/benbernanke/2015/03/30/why-are-interest-rates-so-low/ Bloom, N., 2009, ‘The impact of uncertainty shocks’, Econometrica Broadbent, B., 2013, ‘Forecast errors’, Speech given at The Mile End Group of Queen Mary, University of London Broadbent, B., 2014, “Monetary policy, asset prices and distribution”, speech given at the Society of Business Economists Annual Conference, http://www.bankofengland.co.uk/publications/Documents/speeches/2014/speech770.pdf Dixit, A. and R.S. Pindyck, 1994, “Investment Under Uncertainty”, Princeton University Press Haddow, A., C. Hare, J. Hooley and T. Shakir, 2013, ‘Macroeconomic uncertainty: what is it, how can we measure it and why does it matter?’, Bank of England Quarterly Bulletin.

3/5  Second, a potential increase in economic and geopolitical uncertainty stemming from escalating trade tensions could adversely impact global growth. In this regard, the latest forecasts by international organisations already reflect some impact and, indeed, global growth and global trade has already begun to lose momentum. In addition to protectionist escalation, sources of geopolitical risk have also grown in Europe as a result of Brexit negotiations and the fiscal situation in Italy. But how have financial conditions actually evolved in this new scenario? Until very recently, financial conditions in advanced economies remained loose, while conditions in emerging markets had tightened. Interestingly, US interest rates have increased at the longer maturities, but still modestly. Nevertheless, a materialisation of current risks might lead to a “snap-back” scenario of sharply rising long-run yields, driven by a sudden decompression of term premia, that might amplify market stress and harm the economy. In this context of growing near-term risks, a better understanding of volatility, the second topic of the conference, is also crucial for central banks, given the implications for monetary policies and financial stability. The period of ultra-loose monetary policy has driven a prolonged period of low volatilities. Nevertheless, global markets could be entering a new phase of higher volatility or more frequent short-lived bouts of instability as interest rates increase. Moreover, volatility markets – in particular, volatility-linked derivatives – have become more popular in this low-uncertainty environment.