with covid having provided a further impetus towards localisation, it seems unlikely globalisation will remain as powerful a disinflationary force in the future see, for example, the work of richard baldwin here and here. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice as it has been in recent decades. and it is certainly possible trends in globalisation could even go into reverse in the period ahead, adding inflationary impetus. 20 chart 16 : global trade and growth per cent - 5 - 10 - 15 world trade - 20 world gdp source : imf weo, world bank, bank calculations. on top of these long - standing supply - side forces came the covid crisis. one of the casualties of this crisis, from a supply - side perspective, is likely to be capital formation. the mpc ’ s projections assume around a 6½ % hit to the capital stock from covid, and a long - term scar on the uk economy ’ s supply - side of around 1. 75 %. this will also serve to tighten supply - side constraints as demand increases. there are very significant uncertainties either side of these scarring estimates. on the one hand, the hit to capital could be larger if firms ’ risk appetite remains subdued or if the debts accumulated during the crisis act as a drag on investment. for example, in the uk office for budget responsibility ’ s ( obr ) downside scenario, scarring reduces output by as much as 6 %. baldwin and freeman ( 2020 ). all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice on the other hand, it is possible investment and the capital stock rebounds faster than in a typical recession – for example, if there is catch - up investment or if firms seize the opportunity created by the covid crisis to improvement their digital estates and digital skills. this would reduce, but not eliminate, any scarring. the balance of these effects on investment is something i will discuss in a future lecture. ( d ) fiscal policy after the global financial crisis, the major tool of macro - economic demand management was monetary policy, which was loosened significantly in most countries. by contrast, fiscal policy in most countries was loosened only modestly and in some, including the uk, was tightened. this fiscal response added to the burden placed on monetary policy. the

that determine the trend change in prices. as a measure to prompt an improvement in the aggregate supply and demand balance, in terms of interest rates, the bank has kept the policy rate at the effectively zero level. to encourage a further decline in longer - term interest rates in the money market, the bank introduced in december 2009 a new funds - supplying operation, through which funds with a maturity of three months are provided at an extremely low interest rate of 0. 1 percent, and the total amount of loans to be provided through this operation was set at approximately 10 trillion yen. the total amount of loans was increased to 20 trillion yen in march 2010. in terms of funds provision, the bank has been providing ample funds through various fundssupplying operations, including the new operation. furthermore, the bank has made its stance clear that it will consistently maintain the extremely accommodative financial environment. as for inflation expectations, the other determinant of prices, the bank has, to prevent people ’ s expectations for prices from declining, clearly showed its stance, in the form of the “ understanding of medium - to long - term price stability, ” that it is critical to achieve a positive year - on - year rate of changes in the cpi. to overcome deflation and achieve a sustainable economic growth with price stability, the bank will continue to consistently make contributions as central bank.