Unconventional monetary policy measures, including large-scale purchases of government securities, were necessary to deliver effective market rates negative enough to mitigate globally deficient demand. In the UK, forward guidance supplemented such measures, ensuring households and firms could be confident that interest rates would not be raised prematurely, helping to secure the nascent recovery. 4  See Rachel, L and Smith, T (2015), “Secular drivers of the global real interest rate”, Bank of England Working Paper No. 571. BIS central bankers’ speeches  9  Central banks have also purchased other assets – in some cases using small-scale programmes to alleviate specific cases of market dysfunction, and, in others, larger ones to inject greater stimulus into the economy. By deploying a broad range of ammunition, the economy has been stimulated through a number of channels. Lower policy rates brought forward consumption to today from spending tomorrow – the real interest rate channel. The all-in costs of borrowing were lowered, boosting existing borrowers’ spending power – the cash flow channel. And lower funding costs for banks increased the availability of credit – the credit channel. Lower discount rates and portfolio balance effects supported asset prices – the wealth channel. Currencies’ values fell, boosting competitiveness – the exchange rate channel. And determined central bank action and forward guidance put a floor under inflation expectations and bolstered sentiment – the confidence channel. In this way, central bank actions combatted the worst global downturn since the Great Depression.
Mark Carney: Redeeming an unforgiving world Remarks by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at the 8th Annual Institute of International Finance G20 conference, Shanghai, 26 February 2016. *  *  *  The global economy risks becoming trapped in a low growth, low inflation, low interest rate equilibrium. For the past seven years, growth has serially disappointed – sometimes spectacularly, as in the depths of the global financial and euro crises; more often than not grindingly as past debts weigh on activity (Chart 1). This underperformance is principally the product of weaker potential supply growth in virtually all G20 economies. 1 It is a reminder that demand stimulus on its own can do little to counteract longer-term forces of demographic change and productivity growth. Chart 1 Serial growth disappointments Actual GDP growth 2011 Dotted lines = Emerging economies Solid lines = Advanced economies  2012  2013  2014  2015  Per cent 8 7 6 5 4 3 2 1  2010  2011  2012  2013  2014  2015  0  Source: IMF. That is not to suggest that such stimulus is without value or impact. Accommodative monetary policy can support activity while parts of the economy delever. Monetary stimulus can avoid hysteresis in the labour market. And monetary stimulus can buy time for structural adjustments which shift activity from public to private, external to domestic, and declining to rising sectors.