Bank analysis suggests that Brexit remains the most important driver of short term market interest rates since then (Chart 12). 20  See the written statement to Parliament made by the Chancellor on 20 December 2017, available at www.parliament.uk/ business/publications/written-questions-answers-statements/written-statement/Commons/2017-12-20/HCWS382/. 19  All speeches are available online at www.bankofengland.co.uk/speeches  19  Chart 12: Brexit news has been the main driver of UK interest rates Decomposition of the variance of UK 3-year interest rates since November 2015 Per cent 100  Other  90  Brexit  80  Euo-area data  70  US data  60  UK data  50  Euro-area monetary policy  40  US monetary policy  30  UK monetary policy  20 10 0  Sources: Bloomberg Finance L.P. and Bank calculations. Notes: This decomposition is based on changes in UK 3-year interest rates in 30 minute windows around data releases and monetary policy announcements in the UK, US and euro area, and news about Brexit. Households looked through Brexit-related uncertainties initially. But as the consequences of sterling’s fall showed up in the shops and squeezed their real incomes, they have cut back spending growth to rates about one half of those pre-referendum. Businesses have been somewhere in between. Since the referendum, they have invested much less aggressively than usual in response to an otherwise very favourable environment – with global demand growing strongly, limited spare capacity, relatively high rates of return on capital and the low cost of finance – reflecting the drag from Brexit-related uncertainties.
The monetary policy implementation framework continues to provide the FOMC with excellent control over overnight money market rates, and has proven to be flexible, including through the technical adjustment, in the face of new developments. Thank you for your attention. I look forward to the panel discussion. ###  29  The Federal Reserve is working on enhancements to the overnight bank funding rate (OBFR) to capture wholesale borrowing activity, which moved from offshore to onshore branches. Collection of these data began on October 1, 2018. There will be a review of the new data and an evaluation of how its inclusion will impact the OBFR before its expected addition. 30 For more information about this survey, see Senior Financial Officer Survey, August 29, 2018. 13