Ben Broadbent: The Monetary Policy Committee’s forecasts and the yield curve – predictions versus promises Speech by Mr Ben Broadbent, Deputy Governor for Monetary Policy of the Bank of England, at Reuters, London, 18 November 2015. *  *  *  I would like to thank Clare Macallan for research assistance and I am grateful for helpful comments from other colleagues. The views expressed are my own and do not necessarily reflect those of the Bank of England or other members of the Monetary Policy Committee. Good morning! The previous Governor of the Bank, Mervyn King, once referred to what he called the “rich seam” of MPC communication. Rich or not, it’s certainly a wide seam: MPC members each give several speeches a year; we publish minutes of every meeting, now supplemented with a Monetary Policy Summary; every quarter we publish a 50-page Inflation Report that summarises the MPC’s collective view of the economic outlook and includes our latest forecasts; every Report is followed by a session in front of parliament’s Treasury Committee. Yet, from all this, the outside world seems increasingly interested in only one particular nugget: the MPC’s central inflation forecast two years ahead. This forecast is derived assuming that interest rates follow the path priced into financial markets. Comparing the two, commentators often make very precise inferences from the MPC’s projections about future policy.
On the other hand, the deployment of innovation hubs and accelerators, which takes me to the last part of my address, may successfully contribute to maximising and better understanding the benefits of new technologies for society. Hence, they could encourage financial innovation and/or increase the adoption of these technologies by the supervisory authorities in their functions. Indeed, regulatory sandboxes try to find a balance between these two objectives: they are defined as controlled and delimited environments in which technology-based financial innovations can be tested and monitored by the supervisors, while minimising the risks to the financial system and  5/6  BIS - Central bankers' speeches  consumers. This is the main tool adopted by Spanish financial authorities since 2020 to respond to the emergence of new technologies in finance. The Spanish sandbox has opened up new ways for supervisory authorities to engage and cooperate with the fintech sector, whose players frequently do not have at their disposal other ways of interacting with financial authorities. More importantly, the sandbox has increased the participating firms' understanding of regulation and supervisory expectations and improved their regulatory compliance through their close interaction with the supervisor. The sandbox has also enhanced the supervisors' understanding of both the new technologies applied by the financial sector and their underlying benefits and risks, as well as of the potential regulatory barriers faced by innovators. Four cohorts have been run up until now, and the Banco de España has already published reports with the conclusions of six projects.