Financial Stability and Low for Long Speech given by Sir Jon Cunliffe, Deputy Governor Financial Stability, Member of the Monetary Policy Committee, Member of the Financial Policy Committee and Member of the Prudential Regulation Committee  Society of Professional Economists Annual Conference, London 14 October 2019  I am grateful to Katie Low, Rand Fakhoury, Richard Harrison, Iren Levina, Ryland Thomas and Matthew Waldron for their help in preparing these remarks. 1  All speeches are available online at www.bankofengland.co.uk/news/speeches  Jane Austen’s face appears on the Bank of England’s latest £ note, which entered circulation in September 2017. But the Bank’s association with one of the world’s finest authors goes back much further: as the meticulously kept records of the Bank show, the successful novelist invested much of the proceeds of her writing in Bank of England Annuities. In July 1815, for example, she purchased ‘Navy Five per Cent annuities’ – an undated Bank of England security – with a face value of £ ‘Navy Fives’ were a popular investment during the Napoleonic Wars, paying annual interest, as the name suggests, of 5%. Jane did not purchase the stock at par value – research using the Bank’s archives has established that she paid around £ – making an annual nominal interest rate on her risk free investment of nearly 6%1. Today, a comparable risk free asset – a 30 year gilt – is yielding around 1% nominal.
According to some, it has been difficult to understand the motives behind some of the decisions and it has not been very clear why the decisions reached were preferable to the alternatives. I can have some understanding of this criticism and I will return to this. But first I would like to discuss the question of what is meant by a clear monetary policy. It is not self-evident, as we shall see, and different people appear to mean slightly different things. A theory-based policy is not necessarily clearer The academic literature on monetary policy often describes inflation targeting as the central bank minimising a so-called loss function. This loss function is a weighted sum of a measure of the variability of inflation and the variability of the real economy. The loss function can, somewhat simplified, be written as  measurable. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee’s policy decisions must be informed by assessments of the maximum level of employment, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments.” 13  Vredin, Anders, Martin Flodén, Anna Larsson and Morten Ravn (2012), Enkla regler, svåra tider – behöver stabiliseringspolitiken förändras? (Simple rules, difficult times – does stabilisation policy need to be changed?)