See also Krishnamurthy, A. and A. Vissing-Jorgensen (2013), “The Ins and Outs of LSAPs,” presented at the Federal Reserve Bank of Kansas City’s Jackson Hole Symposium on the Global Dimensions of Unconventional Monetary Policy; IMF Policy Paper on “Global impact and challenges of unconventional monetary policies”, October; Neely, C. (2013), “Unconventional Monetary Policy Had Large International Effects”, Federal Reserve Bank of St. Louis Working Paper 2010–018E, updated August 2013; Joyce, M., M. Tong and R. Woods (2011), “The United Kingdom’s quantitative easing policy: design, operation and impact”, Bank of England Quarterly Bulletin Q3. BIS central bankers’ speeches  3  The concerns expressed by various economists and the media that the extraordinary increases in the monetary base in many countries would lead to significant inflation rates, never materialised. As the following slide illustrates, there was no transmission in the prevailing economic situation by the banks, to credit or broad money aggregates. Inflation did not respond, putting in doubt the quantitative vision about its origin. When asked about what Japan should do to overcome deflation, Milton Friedman answered in 2000: “It is very simple. They can buy long-term government securities and they can keep buying them and providing high-powered money until the high-powered money starts getting the economy into an expansion”.2 The more recent Japanese experience is still open to analysis but the channels envisioned by Milton Friedman have seemingly not been operating in the other advanced economies.
Jean-Pierre Roth: Rising oil prices – a challenge for monetary policy? Speech by Mr Jean-Pierre Roth, Chairman of the Governing Board of the Swiss National Bank, Déjeuners de la Finance, Geneva, 2 November 2005. The complete speech can be found in French on the Swiss National Bank’s website (www.snb.ch). *  *  *  Despite oil prices being at a historically high level, inflation has increased only slightly in recent quarters and growth appears to be robust. Are we to assume, therefore, that oil no longer plays an important role in today’s economic environment? What challenges does the current situation pose for monetary policy? For the first time, the steady rise in energy prices is not the result of a political boycott by oil-producing countries, but of an increase in energy demand, coming in particular from the newly industrialised countries in Asia. In other words, the rise in crude oil prices this time can be attributed to the strong growth in global economic activity. This does not mean, however, that the role of monetary policy has changed. Although core inflation currently appears to be under control in most countries, a persistent and continuous rise in energy costs could have an effect on all prices and wages in the long run, thereby jeopardising monetary stability. Notwithstanding the low level of inflation (excluding energy prices), it is vital that the monetary authorities maintain a forward-looking stance so as not to put their credibility on the line and to ensure long-term price stability. 1/1