which will take the total sum bought to £325 billion. to give you some context, that represents about a fifth of the annual output of the united kingdom and around a third of the total stock of uk government debt in issue. why did we decide to inject further monetary stimulus into the economy? and how likely is it to be effective? we started quantitative easing in march 2009 in the aftermath of the collapse of lehman brothers, as the uk economy was undergoing its deepest post - war contraction. bank rate was almost as low as it could go and further stimulus was necessary to put a floor under demand and get the economy growing again. all told we bought £200 billion of gilts during that initial phase of quantitative easing. quantitative easing essentially involves trading one liability of the state – gilts – for another – monetary claims on the bank of england. we aim to buy mainly from non - bank private financial institutions, such as pension funds and insurance companies, not from the bis central bankers ’ speeches banks, as is sometimes erroneously claimed 1. when we buy a gilt, we simply credit the bank account of the seller with an appropriate sum. if the seller were indifferent between holding the gilt and holding the associated bank deposit, that is where things would stop. but because deposits tend to yield less than gilts and assets such as corporate bonds and equities, the seller is likely to want to buy some other asset instead. the consequence is upward pressure on the prices of a whole range of assets, including corporate bonds and equities. that increases the availability, and reduces the cost, of finance to corporates. it also boosts the value of people ’ s wealth, which should encourage more spending. as i noted a moment ago, we aim to acquire the gilts from institutions other than banks. but as a by - product of the purchase, banks will find that they have both more customer deposits and an increase in their claims on us ( what are known as bank reserves ). that may encourage them to increase their lending, though in the particular circumstances prevailing during and after the financial crisis, we expected this effect to be quite weak. that is in line with the observed weakness in bank lending over the past three years. our analysis of the first phase of quantitative easing suggests bond yields were around one percentage point lower than they would otherwise have been. and uk equity prices rose 50 % during the programme, though only a small part of that is likely to be down to quantitative easing

joachim nagel : the current economic situation welcome words by dr joachim nagel, president of the deutsche bundesbank, at a club evening of the international club of frankfurt economic journalists, frankfurt am main, 21 november 2022. * * * 1 words of welcome ms schreiber, many thanks for your kind invitation and warm introduction. i am very pleased to join the ranks of the bundesbank presidents who, starting when the euro was introduced back in 1998, have been invited by the international club of frankfurt economic journalists to meet with its members for an exchange of views and ideas. like my three predecessors, ernst welteke, axel weber and jens weidmann, it is very important to me to communicate and interact with media representatives. in times of high inflation, it is all the more necessary to explain and contextualise what pushes inflation higher and how effective monetary policy measures are. as journalists, you have a particularly important role to play here as the link between an institution such as the bundesbank and the general public. that's because, in turn, communication with the public is key to the effectiveness of monetary policy and of economic policy in general. a current example is the proposal put forward by the gas price commission. unlike a price cap, the gas price brake does not distort price signals at all. however, for the full effect of the gas - saving incentives contained in this brake to be felt, the general public needs to correctly understand them. communicating in an accessible way with the outside world helps to create trust – and trust is an indispensable foundation for monetary policy. christine lagarde summed it up well recently. : " if people don't understand what i'm saying, how can they trust me? after all, today people don't trust someone only because the person expresses herself or himself in a complicated way " 1 your reporting makes a significant contribution to helping us achieve our monetary policy objectives. the way in which you explain and give context to this complicated subject matter helps your audience understand it. but we central bankers and economists also need to take care to express ourselves in a way that can be clearly understood. accessible communication fosters public trust – and that is what the success of our monetary policy measures hinges on. it is precisely this confidence in our ability and our determination to ensure price stability that will be vital in the coming months – because challenging times lie ahead. and the ecb governing council will have to continue