Their thinking is determined primarily by the short-term performance of their portfolio. In certain situations, that may intensify the “herd instinct”, triggering a “rush to the exit”. At the same time, new financial instruments make it easier for them to incur higher risk positions. Swings in sentiment may then lead all the more easily to precarious situations.
Thank you Mario for being with us today and convey our thanks to the Bank of England for allowing you to do so. I am also pleased to welcome Stefan Gerlach as observer to the MPC. He has extensive experience in monetary policy, having held a number of positions both in central banks and in academia.