investor or bank which would make purely discretionary judgements about whose cp to buy. rather, a facility was set up which, in principle, any firm could access if they met fairly broad criteria. the apf offered to buy up to three - month cp at spreads which were significantly below those in the market at the time, but which were significantly above those expected to prevail in normal conditions. initially this would help to drive market spreads down and the apf would then revert to providing a “ backstop ” offer. in this way the scheme was set up to be self - liquidating as normal market conditions returned. there were some important restrictions. most notably, only broadly investment grade paper could be bought, consistent with the terms initially set out by the chancellor and so limiting the degree of credit risk taken. eligible firms also had to contribute materially to the uk economy and must not be banks ( other policies, as noted, had been introduced to help banks ). and individual counterparty limits were imposed. although disentangling the precise impact of the scheme from the global improvement in financial markets is difficult, it does appears to have been successful. purchases peaked at around £2. 4bn in late april 2009, at that time amounting to around one third of the sterling cp market. but, as i have stressed, the objective of the scheme was not to purchase a large quantity for its own sake. it was much more important that market spreads for the average issuer started to fall soon after the scheme was launched. market spreads for all a1 rated sterling paper fell below apf spreads in august 2009 ( chart 3 ). by february 2010 nearly all firms who had sold cp to the apf were able to re - issue at cheaper rates in the market and the bank ’ s cp holdings have fallen back to under £300mn. that decline in usage, together with greater ability to issue in the market, indicates the improvement in market conditions which the scheme was intended to help bring about. i should note that, at the current moment, the need for firms to issue cp is at something of a low point. investment - grade firms do not seem to have a strong demand for short - term cash and are concentrating on issuing longer - term debt. we have promised to keep the cp scheme under review and give 12 months notice before it is withdrawn. corporate bonds a corporate bond scheme was also set up last year. in january 2009, the primary market was open for new

and inflation expectations appear low, as i noted earlier. i want to emphasize that monetary policy is data dependent and is not on a preset course. in this regard, i look forward to hearing the deliberations of the committee. recognizing the data we have on hand for the second quarter is quite mixed and still limited, and there is important near - term uncertainty, there would appear to be an advantage to waiting until developments provide greater confidence. prudent risk - management would suggest the risks from waiting until the totality of the data provides greater confidence in a rebound in domestic activity, and there is greater certainty regarding the “ brexit ” vote, seem lower than the risks associated with moving ahead of these developments. this is especially true since the feedback loop through exchange rate and financial market channels appears to be elevated. in light of this amplified feedback loop, when conditions are appropriate for a policy move, it will be important that it be understood that any subsequent moves would be conditioned on further evidence confirming continued progress toward our objectives and not as inevitable steps on a preset course. indeed, several factors suggest that the appropriate path to return monetary policy to a neutral stance could turn out to be quite shallow and gradual in the medium term. in particular, it appears likely that the medium - term neutral rate, or the real federal funds rate consistent with the economy remaining at full employment and 2 percent inflation, may be quite low. with productivity running very low, substantial overcapacity and disinflationary pressures abroad, and less favorable demographics, the neutral rate may be lower and today ’ s federal funds rate closer to neutral than previously anticipated. although we cannot observe the neutral rate directly, a variety of models suggests that it is currently very low relative to historical norms. earlier in the recovery it seemed likely that the low level of the neutral rate was largely due to temporary factors, such as tight credit, weak consumer confidence, and the loss in household wealth following the crisis. however, with the recovery well into its seventh full year, credit in many markets is widely available, while consumer confidence and household net worth are at high levels. as a result, it appears more likely that much of the decline in the neutral rate is likely to prove persistent, consistent with a variety of estimates. 7 one likely explanation for this persistence is the sharp drop - off in potential output growth since the great recession. from 1953 to 2003, potential output growth varied between 3 and 4 - 1 / 2 percent,