This is obviously true relative to foreign exchange markets, but also relative to the gilt market, which had been the exclusive focus of previous MPC asset purchase decisions. To provide some metrics: the volume of sterling corporate bonds traded in a typical day is less than 5% of that traded in gilts, while typical trade sizes are around £ and £ respectively. Bid-offer spreads for a representative sterling investment grade bond would be around 10bps, whereas for a benchmark 10 year gilt these would generally be less than half a basis point. So a key challenge was to articulate an approach which would be effective in this different context. An immediate consequence was that the MPC framed its policy decision somewhat differently: it determined to purchase up to £ billion of corporate bonds over 18 months, whereas for gilts the MPC decided to purchase a fixed total of £ billion of gilts over a six month period, reflecting not only our ability to purchase more quickly in that market but greater certainty about the achievable pace. Turning to implementation, the Bank has an inclination to use auction-based mechanisms to implement policy decisions where possible. Auctions cater for wide participation among active participants in the market in question and avoid the Bank having to discriminate actively between counterparties or instruments. 6  There was a much smaller (around 1.5%), near-instantaneous and much less remarked-upon spike on 30 December in the euro-US dollar exchange rate. 7 See box on page 9 of the Bank’s August 2016 Inflation Report.
I would like to convey my sympathy to our colleagues of the IFS, 10  who had the opportunity to work in close collaboration with him, and to the academic community in general for this loss. Finally, let me express my gratitude to the organisers for making this conference possible and to all of you for attending. I wish you a very productive meeting and a pleasant stay in Madrid. Thank you very much for your attention. 11