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- Title
Risk, uncertainty and monetary policy regimes.
- Authors
Tucker, Paul
- Abstract
In this speech, Paul Tucker explores how option prices can shed light on the risks in the current financial environment, including uncertainty about the expected path of monetary policy. Although monetary policy may have become more credible, there is evidence of greater uncertainty at present about the path of nominal interest rates, especially in the United States. When official rates are materially away from their 'neutral' level, there may be uncertainty, not only about future shocks, but also about how, absent shocks, the central bank will return to 'neutral'. In the United Kingdom, there have been few periods over the short life of the MPC when policy has proceeded to unwind its response to past shocks and so return towards 'neutral' along a smooth path. So there have been few opportunities to observe how the MPC would choose to do so. Above and beyond this, however, market uncertainty seems not to have been influenced by the change in the Government's inflation target.
- Subjects
TUCKER, Paul; SPEECHES, addresses, etc.; MONETARY policy; RISK; INTEREST rates; BANKING industry
- Publication
Bank of England Quarterly Bulletin, 2004, Vol 44, Issue 1, p84
- ISSN
0005-5166
- Publication type
Article