likely to come mainly through two channels. the first is a lower value of the exchange rate than otherwise would have been the case. the second is a boost to the disposable income of the household sector. in aggregate, the household sector pays around two dollars in interest for every dollar it receives in interest income. so, in aggregate, lower interest rates reduce the net interest payments of the household sector and so boost overall disposable income. in time, we would expect the lower exchange rate and the boost to disposable income to lead to more jobs, lower unemployment and a stronger economy. this should benefit us all, although i recognise that in the short run the effects are felt unevenly across the community. it is partly because of this unevenness that i want to repeat a point i made in answering the second question. and that is : the best approach to delivering lower unemployment and a stronger economy is through structural policies that support firms expanding, investing, innovating and employing people. these policies can have distributional effects too, but the benefits are more broadly based. so, as i said, as we ease monetary policy, it is in the country ’ s interest that other policy options are considered too. that brings me to the end of my four questions and answers. i hope that this has helped you understand the board ’ s thinking and why we took the decision today. i am happy to answer other questions that you might have. thank you for listening and for joining us this evening. 4 / 4 bis central bankers'speeches

as i have noted, compensation in financial instruments for various risks is very skinny indeed. investors in the long - term debt of most sovereigns in the major countries are receiving very little – if any – compensation for inflation and only minimal compensation for term. some model - based decompositions of bond yields suggest that term premia on us long - term debt and some sovereign debt in the euro area are actually negative. compensation for credit risk is also narrow in many debt markets. bis central bankers ’ speeches moreover, because the search for yield is a global phenomenon, considerable amounts of capital have flowed across borders. there is some evidence to suggest that as emerging country bond markets have developed, particularly in asia, more issuers have been able to raise funds in their local currencies. this leaves the foreign exchange risk associated with the capital flows more with the investor rather than a local bank or corporate, which is a good development. nonetheless, we don ’ t have full visibility of those risks and there has been a notable build - up of debt overall in some emerging markets. the other factor of importance is a set of structural changes in capital markets, where there are two key features worth noting. one is the expanding role of asset managers. the search for yield, and the general tendency since the crisis for some intermediation activity to migrate to the non - bank sector, has resulted in large inflows to asset managers since the crisis. yet liquidity – the ability to shift significant quantities of assets in a short period without large price movements – has probably declined, which is the second of the structural changes worth noting. certainly the willingness of banks and others to act as market - makers in the way they did in the past will have diminished considerably. now, of course, to some extent this is a result of the changes to financial regulation which have aimed to improve the robustness of the financial system. we should be clear that it was intended that the cost of liquidity provision in markets be more fully borne by investors. liquidity was under - priced prior to the crisis. nonetheless, the question is whether end - investors truly appreciate that the availability of liquidity in the system has declined. good asset managers have sufficient liquidity holdings to meet redemptions that may occur over any short time period and will also offer appropriate redemption terms and so pose only limited risks to the broader financial system. but the cost of holding the most liquid assets in a world of very low returns overall may pressure some asset managers to