As my colleague on the MPC Jan Vlieghe has illustrated, such a change in the distribution of economic outcomes reduces the global equilibrium rate of interest. See ‘Real interest rates and risk’, speech by Gertjan Vlieghe given at the Society of Business Economists’ Annual conference, 15 September 2017. 28 See, for example on pricing behaviour, Cavallo, A (2018), ‘More Amazon Effects: Online Competition and Pricing Behaviors’, paper prepared for the 2018 Jackson Hole Symposium, or ‘The Future of Work’, 2018 Whitaker Lecture given by Mark Carney at the Central Bank of Ireland, 14 September 2018, for a broader discussion of the effects on the Phillips curve. 29 In the UK, the average cut in Bank Rate in easing cycles was larger than the average increase in tightening cycles. For example, Bank Rate was cut by a total of 250 basis points in the easing cycles of 1998-99 and 2001-04. 30 Bernanke, B, Kiley, M and Roberts, J (2019) ‘Monetary Policy Strategies for a Low-Rate Environment’, Finance and Economics Discussion Series 2019-009. 31 Reifschneider, D, and Williams, JC (2000) ‘Three Lessons for Monetary Policy in a Low Inflation Era’, Journal of Money, Credit and Banking, Vol. 32(4), pp. 936-966. 22  All speeches are available online at www.bankofengland.co.uk/news/speeches  22  Recent experience in the euro area and elsewhere suggests that policy rates can be cut somewhat below zero. But it is unclear to what extent and for how long – uncertainties that can reduce the efficacy of negative rates.
12 See ‘[De]Globalisation and Inflation’, speech by Mark Carney given at the 2017 IMF Michel Camdessus Central Banking Lecture, 18 September 2017. 10  All speeches are available online at www.bankofengland.co.uk/news/speeches  10  private sectors sought to reduce their pace of borrowing. These shorter-term factors pushed the equilibrium interest rate in the UK (and other advanced economies) into negative territory, prompting the adoption of unconventional policies following the crisis. The fading of the headwinds from the crisis implied that some of the fall in the equilibrium rate would gradually unwind, though the structural forces were thought likely to persist for many years to come. As a result, the MPC judged that the pace of Bank Rate increases consistent with eliminating slack and keeping inflation close to the target would be gradual and that, even once spare capacity had been absorbed, the appropriate level of Bank Rate was expected to be materially below the pre-crisis average of 5%. Out of that assessment came the guidance that future rises in Bank Rate were expected to be “limited and gradual” – a phrase so often repeated it became part of the monetary policy furniture. As intended, the MPC’s “limited and gradual” guidance dampened interest rate volatility and reduced the correlation between interest rate volatility and economic uncertainty. Both developments increased the degree of monetary policy stimulus at a given policy rate, thereby reinforcing the recovery during turbulent times. GDP grew robustly over this period, supported by strong consumer and business spending against a backdrop of continued fiscal consolidation.