This approach is codified in the UK institutional set-up, with independent monetary and financial policy committees that are required by remit to have regard of the actions of each other. By addressing macro financial risks at source and building systemic resilience, the PRC and FPC allow monetary policy to concentrate on its job of delivering price stability. Third, “unconventional policies”, including asset purchases and forward guidance, are powerful policy tools in a low r* environment with more frequent encounters with the effective lower bound. A growing body of research shows that asset purchases led to substantial, long-lasting, reductions in long-term yields,26 providing support to activity when policy rates are constrained. Bank staff estimate that the MPC’s £ billion of asset purchases in August 2016 were equivalent to a Bank Rate cut of around 50 basis points. As the MPC noted at the time, there was considerable scope to increase purchases and to use the Term Funding Scheme to reinforce the pass through of further cuts to Bank rate had additional stimulus been required. 24  Such behaviour would be particularly concerning if people do not recognise the riskiness of the assets they are investing in to achieve their desired returns, for example because they are complex instruments which disguise the underlying risk of the assets and / or because the assets lie outside the regulatory perimeter. There are parallels in both cases to the pre-crisis situation. 25 It is also important not to muddle cause and effect of low interest rates.
In other words, depositors believe that they need very high nominal interest rates in Denars, in order to have a real return on savings, which leads to high interest rates on loans. This phenomenon was not and is not a result of the mistrust in the banking system. Mistrust of depositors comes from the fear that due to possible devaluation followed by inflationary transmission effects, saving in Denars would be insufficiently compensated if interest rates on savings deposits in Denars come too close to the interest rates on deposits in Euros. The stability of the exchange rate which established the idea that price stability is a public good one cannot live without, is the reason why depositors are no longer so much under the  2  BIS central bankers’ speeches  influence of this phenomenon. The latest data on the increased saving in Denars, compared to saving in Euros, point to this conclusion. The expectation that the stable exchange rate level will be maintained simultaneously indicates that the difference between real interest rates in Denars and real interest rates in Euros continues to decrease gradually, certainly without any of them remaining on negative territory for a longer time. The National Bank will continue not to hesitate to intervene in the foreign exchange market and increase the interest rate on the main instrument which represents an operational signal. Through these policies the National Bank confirms its capacity and institutional determination.