We are doing more work to isolate the impact of these factors as part of the ongoing cost-benefits analysis underlying these tools. Putting all of this together, I would conclude that the rationale for the FPC’s action remains sound in the light of subsequent evidence and that the action itself was effective at preventing further build up in the tail of more indebted households, and more importantly that it continues to function as an insurance policy. More work is in train to assess whether the FPC’s actions may have affected the evolution of house prices and transactions but even if we assume there was no broader impact of this kind, the work published by the Bank today suggests strongly that the policies have functioned as intended. They have restrained the buildup of more highly indebted households that would otherwise leave the economy and subsequently the financial system more vulnerable in a downturn. There are two interesting postscripts to the FPC’s 2014 actions. 12  All speeches are available online at www.bankofengland.co.uk/news/speeches  12  First, the Committee when it took its decisions left open the possibility that these tools – LTI flow limit and affordability test – might be part of the time varying macro-prudential toolkit. Subsequent consideration by the Committee in 2017, concluded that while the calibration might need to be varied over time, the limits themselves functioned as necessary insurance and should be seen as part of the regulatory system rather than as temporary measures.
Well, by the next day, the markets had figured it out; the projections are made by all FOMC participants, while the statement reflects the policy views agreed upon at the meeting by the voting members of the Committee. We all come into the meeting with our projections, but we then do have a real meeting: All of the participants exchange ideas and argue points of views, and then the voters on the Committee come to a consensus and make a collective policy decision. The information regarding the federal funds rate in the SEP does not substitute for this formal decision of the voting members of the FOMC. That said, the diversity of views is a fact of life. Policymakers may well have differing judgments on the appropriate stance of monetary policy in the particular economic circumstances of the moment. These communications initiatives cannot eliminate these differences of opinion. But they further discipline the parameters of our discussions, clarify the judgments that underlie our policy decisions and enhance transparency and the public’s ability to evaluate current monetary policy with alternative approaches. Forward guidance and policy commitment in an explicit state-contingent policy The macroeconomic environment The new policy tools can also complement the kinds of accommodative policies I have been advocating for some time. The U.S. is now more than two and a half years into its modest and uneven recovery from the Great Recession. Real gross domestic product growth has averaged just 2-1/2 percent.