supported the intent of monetary policy in both the us and europe. it is important to remember that monetary policy is about decision making under uncertainty. considerable uncertainty. policy makers get surprised by economic developments just like everyone else, and that news is often visible to the market before the authorities can even think about the right responses, let alone respond to them. if i, as a policy maker, am uncertain about how policy will evolve, how can the market be so much more certain? i am continually struck by the degree of certainty some market participants seem to have about prospective monetary policy decisions, particularly those of the fomc. in general, communication from monetary policy setters aims to convey details of our reaction functions – how policy might change in reaction to future data or other news – it is not aimed to convey the outcome of a decision that has yet to be made! the best we can usually do is to set out how we are thinking about the outlook so that market participants and others might be able real estate investment trusts exchange traded funds record of the financial policy committee meeting, 18 september 2013 ( http : / / www. bankofengland. co. uk / publications / documents / records / fpc / pdf / 2013 / record1310. pdf ) bis central bankers ’ speeches dynamically to gauge our response as the data and events reveal themselves. forward guidance, on which more shortly, can add to that understanding but the actual outcome for policy will always be dependent on how the economy, and hence the outlook, evolves. can we learn anything about the impact of large scale asset purchases – or quantitative easing – from this recent episode? more work will have to be done on this as a case study but, at face value, the fact that us treasury yields could move by over 100bps just on speculation of a small reduction in the rate of purchases, confirms that asset purchases in the us must have been having a very sizable effect on market prices, at least as large as the quantitative estimates that have previously been made. 4 and the degree of reaction in uk gilt yields makes it clear that there have been large international spillovers – a point which some previous research has also noted. 5 the degree of correlation since may has been striking and for shorter - term rates, it is possible that it has been exacerbated by poor liquidity in money markets and hence over - done. given how the recoveries have differed in scale and nature – the us economy has grown much more

will raise the cost of imported food, but it also presents an opportunity to increase local food production which would reduce dependence on imports in urban areas. although estimates have shown that only 20 percent of the food consumed in png is imported, it may be as high as 50 percent in urban areas. 1 there is, therefore, a clear market for increased local production and distribution. also, while the government may continue to benefit from high revenues, the management of these revenues is increasingly an issue for both fiscal and monetary policy. therefore, the bank of png continues to call for the government to allow it to establish an overseas account to manage windfall mineral tax revenue prior to the establishment of a sovereign wealth fund for the lng project. this would also assist the government in smoothing out expenditure which would reduce domestic demand and inflationary pressures while also increasing the quality of spending. furthermore, there is still the potential for commodity prices to drop, of a weather or conflictrelated crisis causing a reduction in exports, or of some slowdown in the construction of the lng project. the government should plan for these possibilities by saving appropriately during the boom so that it can continue expenditure during any revenue shortfalls. it should not increase expenditure in expectation of higher future revenue when there are already issues with spending quality. thank you. food and agriculture in papua new guinea. 2009. michael bourke and tracy harwood, editors. australia national university e press. bis central bankers ’ speeches