the end it is the private sector that creates and maintains the market. designing the appropriate tools to support and provide a backstop for market functioning is an important agenda for the global central banking community. as the example of the recent bank of england interventions demonstrates, we are still in a learning - by - doing phase of this process. concluding remarks where does this leave the conduct of monetary policy in a context of financial stability operations? i will conclude with two points i see as key. first, it is important to keep such financial stability operations distinct from monetary policy, both in terms of communication and operationally. to the extent that such operations distort the intended monetary policy signal, they paradoxically risk interfering with monetary policy transmission, even as they are intended to support the market functioning on which that transmission relies. second, while respecting the need for separation between monetary policy and financial stability operations, policy makers also need to recognise the unavoidable interactions between the two. after all, an injection of central bank reserves owing to a financial stability operation can have monetary implications via the portfolio balance channel just like qe. and, by design, financial stability operations will have implications for asset prices and financial markets and institutions that influence the overall stance of financial conditions, and thus highly relevant in deciding the appropriate level of bank rate. bank of england monetary policy decisions cannot be taken by the mpc entirely independently of actions implemented by the bank for financial stability purposes : their consequences for the stance and transmission of monetary policy need to be identified and internalised in the mpc ’ s process. early, open and transparent communication among the various parties involved – that is, across the various relevant bodies ( mpc, fpc, bank executive ) within the bank, among the bank and other uk policy institutions such as the treasury, and between policy makers and market participants – is therefore crucial. while financial stability operations remain ‘ temporary and targeted ’ – as emphasised in the bank ’ s initial announcement of its recent gilt market interventions on 28 september 2022 – a natural distinction with the necessarily lower frequency evolution of monetary policy ( and the monetary trends that ultimately determine inflation ) exists. as others have described, this is a key element of the gilt purchases made by the bank in september and october, in the face of market dysfunction. it has rightly be made central to the communication of recent policy interventions, in line with the need for transparency that i have highlighted. the delicate balance between maintaining a clear distinction and internal

impact of the policy rate on the economy. he concluded that the policy rate should be used with greater caution when uncertainty about its effect increases ( brainard ( 1967 ) ). this involves a trade - off that can be illustrated graphically. chart : monetary policy and uncertainty this chart describes a situation where the policy rate is used to counteract the effect of a negative shock to the real economy. two different interest rate paths are shown. the uncertainty is illustrated using bands around the expected paths for the policy rate, inflation and the output gap. in the scenario denoted by the blue line, the central bank does not take the uncertainty associated with the interest rate into consideration. in contrast, the yellow line represents a scenario based on a more cautious monetary policy response to the perceived uncertainty involved. the expected real economic costs of a more cautious response – as measured by the output gap – are somewhat higher, and inflation moves further from the target. in that respect, this is a less appropriate path for the policy rate. but there is also a benefit : uncertainty about the future path is substantially reduced. as you can see in the chart, the uncertainty bands around inflation and output have narrowed. when choosing between the two paths, the benefits must be weighed against the costs. in principle, a robust monetary policy should take account of uncertainty regarding the functioning of the economy. the policy rate in norway has come down to a low level, approaching a lower bound. this has increased the uncertainty about the effect of monetary policy. norges bank has taken this uncertainty into account over the past year and reacted somewhat less to new information, whether the information has pulled in the direction of a lower or a higher policy rate. it has been appropriate to respond with caution. low interest rates could be a precursor to financial instability a period of low interest rates can engender financial imbalances. there is a risk that growth in property prices and debt will become unsustainably high over time. with high debt ratios, households are more vulnerable to cyclical downturns. in the event of a reduction in household income, debt burdens may become heavy to bear, forcing households to reduce spending on consumption, with a deeper downturn as a result. for norges bank, the consideration of restraining the build - up of financial imbalances has long been an element of a robust monetary policy. the aim is to mitigate the risk of particularly adverse economic outcomes further ahead. chart : estimated path for consumption during recessions a