It is perhaps worth recalling what I said on 27 June, in releasing our latest Monetary Policy Statement: ‘It is clear that deviations from desired monetary conditions can be very large indeed without threatening either edge of our inflation target if those deviations are of relatively short duration. This suggests that the Bank should be relatively tolerant of quite large deviations from desired.
The spreads between the interest rates [on bonds] of southern euro area countries and Germany narrowed sharply. That was something that could not have been achieved by any other monetary policy measure.” Were you surprised by this effect? “By the magnitude of the effect? Yes, certainly.