The Bank's monetary easing assumes a transmission mechanism that works in three ways (Chart 12): (1) nominal interest rates are pushed down through yield curve control; (2) inflation expectations are raised by working on people's expectations through the inflation-overshooting commitment, leading to a decline in real interest rates (i.e., nominal interest rates less inflation expectations); and (3) lower real interest rates encourage economic activity and improve the output gap, which in turn pushes up actual inflation.
With the foregoing few remarks and in closing, Mr Chairman, Director of Ceremonies, distinguished ladies and gentlemen, let me once again thank you all most sincerely, for according me this opportunity to speak to you today on this occasion of the official inauguration of CDH House here in the City of Blantyre.