via the flow of purchases made by the central bank. in my experience, central bankers tend to emphasise the former – and this has certainly been the way qe has been expressed at the bank of england – whereas market participants tend to emphasise the latter. this framework illustrates how ‘ stock ’ ( ‘ announcement ) and ‘ flow ’ ( implementation ) effects can be present and suggests how they interact with one another. and third, this framework illustrates how the impact of qt ( or qe ) on asset prices is state contingent – that is, it depends on the environment created by the economic situation and market conditions. this was another important conclusion of the bank survey paper. when markets are functioning well ( and substitutability between money and bonds is high ), qt has a smaller overall effect on asset prices than when markets are functioning poorly. this is in line with the strong impact of qe at times of market stress in 2009 and 2020 relative to its impact in other more benign market environments. more subtly, in better functioning markets, a greater proportion of the impact of qe comes via the announcement / ‘ stock ’ effect relative to the implementation / ‘ flow ’ effect, even though the overall impact is more moderate. what implications do these results have for any implementation of qt? my starting point is that were qt to be implemented, it would be desirable to do so in a manner consistent with keeping bank rate as the ‘ active instrument ’ of monetary policy, in line with current practice. this would represent a continuation of the conventional approach and allow central banks to rely on the large body of experience and analysis of monetary transmission starting from changes in official policy rates. our analysis is consistent with the view that qt actions will influence the economy via their impact on asset prices. as long as we undertake any gilt sales programme in a predictable and wellcommunicated manner, the impact of these sales will be ‘ priced into ’ financial prices, notably gilt yields. as i have already said, these yields are observable in real time, and it is standard practice to condition policy forecast, assessments and decisions on them. the setting of bank rate can then be calibrated knowing how asset sales have influenced the market in order to achieve the inflation target over the medium term. our model also suggests that a gradual implementation of qt – one where the announcement precedes implementation of the gilt sales in a credible and well - flagged manner – will lead to

the extent that the most important of these asset prices are set in open traded markets where the prices are observable in real time, in many cases the practical implementation of monetary policy can continue by conditioning policy rate decisions on those asset prices as well as the broader economic environment. this focus on the is curve leaves open the question of whether monetary developments can also enter the phillips curve relationship in the canonical new keynesian model, say via influencing longer - term inflation expectations by acting as some form of ‘ nominal anchor ’ to the economy. i don ’ t have the time or space to even start to address that question today. but it does seem central to some of the fears expressed by lord king two decades ago. he seemed to suggest that, were the role of money to be neglected and monetary policy become focused on shorter - term stabilisation of real economic variables, then the longer - term stability of inflation could be put at risks. with inflation already at undesirably elevated levels, the stakes are high. there is still much to do in thinking about whether and, if so, how monetary variables can help pin down the wider nominal dynamics of the economy and keep inflation at target sustainably and credibly over the medium term. so, to conclude, i return to the question asked at the outset : ‘ what did the monetarists ever do for us? ’ i doubt that monetarism will be ( re ) embraced by either the academic or central bank communities in the coming years. but – just like the romans in the famous monty python sketch – maybe our understanding of how the monetary policy transmission mechanism has, does and will work owes more to them than we typically care to admit. the views expressed in this speech are not necessarily those of the bank of england or the monetary policy committee. i would particularly like to thank ryland thomas for his considerable help with the analytical work presented in the annex and saba alam, rich harrison, jack meaning, martin seneca, rashmi harimohan, bob hills and gavin wallis for helpful discussions in the preparation of this speech. the text has also benefitted from helpful comments from andrew bailey, ben broadbent, alan castle, jonathan haskel, andrew hauser, nick mclaren, fergal shortall, dave ramsden, silvana tenreyro, daniel walker and chris yeates, for which i am most grateful. opinions ( and all remaining errors and omissions ) are my own. references bailey,