The big moves in asset prices during 2009 – a 50% rise in equities, 150bp fall in LIBOR spreads, the 150 bps fall in targeted corporate bond spreads for example – will have been strongly supported by the Bank’s monetary policy operations. And by purchasing the gilts which asset managers and others would normally have bought, the impact of the quantitative easing programme will have been to increase the demand for more risky assets – like corporate bonds. So the corporate and gilt purchase programmes have been complementary. Conclusion In my talk this evening, I hope I have explained a bit more clearly the motivation for and the design of the APF corporate purchase schemes. The Bank has not sought to provide large scale funding directly using public money. Rather, the operations have been consistent with a central bank acting as “Market Maker of Last Resort”. The Bank has transacted in modest quantities designed to improve the liquidity of corporate credit markets, bring down the cost of credit and encourage private sector lending. That has been supported by the much larger programme of quantitative easing and the low level of Bank Rate. The evidence suggests that, in conjunction with a very large monetary stimulus, abroad as well as at home, the corporate purchases have been successful in helping to invigorate those corporate credit markets in which the Bank has intervened. References Benford J, Berry S, Nikolov K, and Young, C (2009), “Quantitative Easing”, Bank of England Quarterly Bulletin 2009 Q2, available at http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf.
5  1  An additional element has been exchange rate targeting which was based on an external anchor. Effectively, this represents an intermediate objective if domestic credibility of the central bank may be weak. 2  See Greenspan (2002), Blinder (2005), Mishkin (2007) and Bean, Paustian, Penalver, and Taylor (2010), “Monetary Policy after the Fall”, Federal Reserve Bank of Kansas City Annual Conference, Jackson Hole, Wyoming, August. 3  See the discussion in Christiano, Ilut, Motto, and Rostagno (2010) on “Monetary policy and Stock Market Booms.”  4  See “A Monetary Policy Strategy in Good and Bad Times: Lessons from the Recent Past” Fahr, Motto, Rostagno, Smets and Tristani, ECB Working Paper Series No. 1336, May 2011. 5  See the evidence in Fischer, Lenza, Pill and Reichlin (2008): “Money and monetary policy – the ECB experience 1999–2006” and Trichet (2008): “Risk and the Macro-economy”, Keynote address at the conference “The ECB and its watchers X”. 2  BIS central bankers’ speeches  Nonetheless, I think it is fair to say that nobody – including central bankers – has expected a crisis of the dimension that we have been experiencing since five years. 6 The overall favourable macroeconomic constellation from the Great Moderation, with low volatility and robust growth, has certainly induced some benign neglect – also on the policy side.