The pick-up in economic activity in the United Kingdom has been sharper than in the United States and, according to most analysts, it appears to be underpinned by sounder foundations. Inflation is holding on a path consistent with the target of 2% and it should also be borne in mind that the prices of certain assets, housing in particular, have been moving on a rising trend and have reignited debate on the role the central bank and its monetary policy should play in preventing potential bubbles. Here, although the Bank of England has not yet modified its accommodative monetary policy stance either, the prevailing expectations are already discounting a more or less immediate change. The latest messages from the Bank of England suggest, in any event, that when rates begin to rise they will do so very gradually, remaining below historical values for a lengthy period. The monetary policy of the Bank of Japan The differences are even more marked in the case of the Bank of Japan. Nor can we forget that, prior to the international crisis, the Japanese economy had not overcome the effects of its own domestic crisis which began in the 1990s following a substantial credit boom and a burgeoning real estate bubble. The various economic programmes implemented since have not managed to put the Japanese economy back on a stable growth path, illustrating the difficulty involved in restoring normality when an economy enters a perverse cycle of deflation and contraction of activity.
Massive injections and the enabling of mechanisms to supply liquidity in different currencies were pivotal in containing the risk of such collapse. These measures were accompanied by official interest rate cuts that contributed to generating the necessary demand stimuli to counter, as far as possible, the adverse effects of the crisis on activity and employment. In the initial stages of the crisis, the measures of the Federal Reserve, the Bank of England, the Bank of Japan and the European Central Bank essentially followed a common pattern. The differences between them had, above all, to do with the singular characteristics of their respective operational frameworks. Subsequently, differences have become apparent between the paths pursued. While cyclical positions continued relatively to coincide, the emerging divergences were linked to the specific structural features of the different economies, such as, for instance, the different weights of banks and capital markets in the intermediation of financial flows. Later, however, differentiation was increasingly more related to the differing pace of exit from the crisis in each economic and monetary area. The monetary policy of the US Federal Reserve Since the start of the crisis, the US Federal Reserve has been pursuing a strongly expansionary monetary policy. In this connection it has resorted to a wide array of both conventional and less conventional measures. The Federal Reserve cut its official interest rates successively until placing them at their natural lower bound, i.e. close to zero, and it embarked on massive securities purchase programmes that substantially expanded its balance sheet.