On asset purchases: “If incoming information broadly supports the committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the committee will likely reduce the pace of asset purchases in further measured steps ...” On the timing of liftoff: “The committee continues to anticipate ... that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends ...” On the post-liftoff path of the funds rate: “The committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the committee views as normal in the longer run.” As a former practitioner, I can tell you that market operators prefer Odyssean guidance to Delphic guidance, and within the Odyssean model, tend to prefer inflexible, calendar-based guidance to guidance that’s either conditional or qualitative. Life in my former incarnation would naturally be much more pleasant if I could dial in the specific dates and levels of interest rate movements. But as a central banker, I am haunted by a comment made by Winston Churchill in 1926, shortly before things began to unravel in the global financial  4  BIS central bankers’ speeches  markets.
Uncertainty and capital adequacy Ease of exit is a consequence of the good risk management that pillar 2 requires of firms: risk management that is forward looking and prepares for unpalatable scenarios by structuring the balance sheet and business model appropriately. Good risk management is also about organising the firm in a way that allows the adequacy of the  Goldilocks and the three pillars: how much capital is just right? ‐ speech by Anna Sweeney | Bank of England  Page 4  capital base to be sensibly assessed, and the judgement about any need for intervention to be made in a timely way. In any balance sheet there will be risks that can be quantified, and there will be uncertainties that cannot. Uncertainties emerge for example, from reliance on unobservable assumptions or indeed concentration of exposure to any single risk factor on either side of the balance sheet. Another pertinent example is reliance on matching adjustment for illiquid assets: market prices of such assets are not directly observable and the calibration of the matching adjustment benefit relies on further splitting that unobservable spread into unobservable credit and liquidity components: so heavy reliance on the resulting matching adjustment is a source of material, inherent uncertainty. The greater the exposure to uncertainty, from any source, the less confidence we can have in the adequacy of the capital determined by a quantitative model.