So while there is certainly still a risk that productivity will disappoint again – even conditional on a smooth transition to an average of possible Brexit outcomes, as in our central forecast – and that wages will again turn out weaker, even in that case it seems likely to me that, given the gradual move into excess demand that we expect, unit labour costs and inflationary pressure would still pick up as in our August forecast. 27  That said, a range of outcomes for Brexit are clearly still possible, not all of which are captured in our central forecast. Consistent with that it is noteworthy that option pricing implies that market participants are insuring to a greater degree against tail outcomes: FX implied volatilities have increased in recent months, implying 26  Other forecasters were similarly surprised – for instance the OBR were predicting 3.7% cumulative real wage growth over the same period in the March 2016 Economic and Fiscal Outlook (available at http://obr.uk/efo/economic-fiscal-outlook-march-2016/). 27 I set out my views on the economic outlook and the labour market in detail in a speech in June: Ramsden, D. (2018), “What’s Going On?”, speech at the Barclays Inflation Conference, available at https://www.bankofengland.co.uk/-/media/boe/files/speech/2018/whatsgoing-on-speech-by-dave-ramsden.pdf. 9  All speeches are available online at www.bankofengland.co.uk/speeches  9  greater weight on the tails of the distribution, while risks reversals have fallen to their lowest levels in over a year, suggesting a greater increase in relative weight on downside outcomes.
The Scheme was designed to reinforce the transmission of the August 2016 cut in Bank Rate to 0.25%, thereby helping to lower the effective lower bound from 0.5% to close to 0%. It also led to a significant increase in the size of the Bank’s balance sheet, again via the APF, peaking at £  Acting in support of liquidity  While operations to meet our monetary policy remit might take the biggest share of our balance sheet, they are by no means the full extent of it. The Bank is the sole provider of sterling central bank money – the most liquid sterling asset. Because of this, our balance sheet has an important role to play in financial policy, through the provision of liquidity insurance. The core business of a commercial bank is to lend money by making loans to households and firms; to facilitate this it often needs to borrow money, by taking in retail deposits or by seeking funding from investors  7  There were also some smaller-scale initial purchases of private sector assets, partly financed by Treasury bill issuance; in August 2016 the MPC also voted to purchase £ of corporate bonds. 8 The APF itself currently holds £ of gilts and £ of corporate bonds, as well as the loans created via the TFS. For an overview of the estimated effects of QE and the mechanisms through which it works, see Haldane, A. G., Roberts-Sklar, M., Wieladek, T. and Young, C. (2016), “QE: The story so far”.