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- Title
Uncertainty, policy and financial markets.
- Abstract
In this speech, John Gieve, Deputy Governor for financial stability, discusses the range of uncertainty facing monetary policy makers, emerging lessons from the US sub-prime market and the significance of sovereign wealth funds and other influential investors. He argues that the degree of uncertainty in the current economic environment is a return to normality after two years of exceptional predictability in monetary policy both in the United Kingdom and elsewhere. On financial markets, he argues that developments in the US sub-prime market have brought out vulnerabilities in the new structured credit markets and the move to an `originate and distribute' model of banking, including potential misalignment of incentives, the changing way that exposures impact on bank balance sheets, the way market liquidity can dry up in stressed conditions and the difficulty of valuing instruments. Finally, he notes that the growth of sovereign wealth funds over time would tend to increase the price of riskier assets, like equities and corporate and emerging market bonds, compared to government bonds, and that the switch of reserve-rich countries from lenders to owners of financial or real assets is also likely to lead to political tensions and pressures for protectionism.
- Subjects
SPEECHES, addresses, etc.; MONETARY policy; FINANCIAL markets; FINANCIAL statements; ASSETS (Accounting); GIEVE, John
- Publication
Bank of England Quarterly Bulletin, 2007, Vol 47, Issue 3, p437
- ISSN
0005-5166
- Publication type
Article