- 1 10th - 90th percentile interquartile range estimated mean path uk - 10 - 20 - 30 - 40 - 1 distance in years from the first year of crisis * uk observation for year 3 based on q1 - q3 data for 2011 chart 6 : uk inflation per cent estimates of vat, energy and import price contribution cpi inflation - cpi estimates excluding - vat, energy and import price contribution - 1 - 2 - 3 bis central bankers ’ speeches chart 7 : commodity prices index : jan 2010 = 100 oil metals agricultural jan 10 jul 10 jan 11 jul 11 the economic outlook cml mortgage industry conference london charlie bean, deputy governor monetary policy 03 november 2011 bis central bankers ’ speeches

that the squeeze on real household incomes will ease, providing some support for consumer spending. even so, real income growth will still only be moderate and high levels of indebtedness may weigh on the spending of some households. moreover, the uncertainties associated with the euro area are likely to persist, retarding growth there. not only will that weigh on our exports, but funding conditions may also remain difficult, while british businesses are likely to remain cautious about investing and hiring. at its october meeting, the monetary policy committee agreed that the outlook for uk output growth was markedly weaker than it had believed earlier in the year. without action, and despite the present excessive level of inflation, the extra margin of slack meant that inflation would consequently be more likely to undershoot, rather than overshoot, the 2 % target in the medium term. so it was against that background that we decided to re - start our asset purchases, buying another £75 billion of gilts. as you will no doubt know, quantitative easing aims to depress a range of longer - term yields and raise asset prices, so boosting demand. our analysis suggests that our first £200 billion of asset purchases reduced the yields on gilts and corporate bonds by around a percentage point2. studies for the united states, using a similar methodology, find comparable effects from the federal reserve ’ s large - scale asset purchases, which is comforting. the asset purchases also have the effect of boosting banks ’ holdings of the most liquid asset, central bank reserves, which may be of particular value at the current juncture. while one cannot be confident about the impact of our earlier purchases on the real economy, our analysis points to a peak effect on output of 1½ – 2 per cent and of ¾ – 1½ percentage points on inflation. at this juncture at least, we have no reason to believe that, suitably pro - rated, the current phase of purchases will be greatly different in their effect on either asset markets or on the real economy. for a summary of the evidence, including references to related studies, see michael joyce, matthew tong and robert woods ( 2011 ), “ the united kingdom ’ s quantitative easing policy : design, operation and impact ” bank of england quarterly bulletin, 51 ( 3 ), 200 – 212. bis central bankers ’ speeches several commentators have suggested that the effectiveness of quantitative easing could be enhanced by spending the newly created money on something other than government debt. conceptually, one can always think