That’s true of the most recent period as well: prices of non-oil goods exports rose 12% through the course of last year, in line with those of imports. Admittedly, the behaviour of the sterling price of services exports is rather different. They’re more stable in the face of exchange-rate movements (Chart 8), implying that depreciations do indeed reduce them in foreign currency terms. I think this is understandable. Services are less homogenous than goods and there’s more room for non-price competition. The UK has a larger presence in this area, accounting for 7% of global services trade in total, 12% for business and financial services specifically. Those wholesale services are relatively specialised. Chart 8: Sterling price of services exports more stable  Equally, and for many of the same reasons, the evidence suggests that service export volumes are much less sensitive to any cross-country variations in prices than in goods markets. Indeed it’s only because of this relative insensitivity that such variations can persist for any length of time. At any rate, my main point here is that the positive effects of a currency depreciation depend at least as much on the response of domestic firms as on that of foreign buyers.
This is true whether measured in terms of the amount of duration being pulled out of the market or purchases as a share of total issuance. Lessons learned As I mentioned earlier, there have been at least six major areas where there has been significant learning, which has influenced the evolution of policy. Let me turn to them. The importance of managing expectations Managing expectations is always central to monetary policy. However, at the zero bound this is even more critical than usual. There are two aspects of this. First, keeping inflation expectations anchored at levels consistent with the central bank’s medium-term inflation objective – 2 percent on the personal consumption expenditures deflator in our case – is vitally important. Once deflation expectations become well entrenched, it is very difficult to change them. And, because inflationary expectations are an important driver of actual inflation outcomes, deflationary expectations can be self-fulfilling in driving actual deflation outcomes. Also, if inflation expectations were allowed to fall, this would raise the level of expected real interest rates, making monetary policy less accommodative. Conversely, a central bank does not want medium-term inflation expectations to climb above levels consistent with its inflation objective. If inflation expectations were to become unanchored to the upside, that could damage credibility and result in higher risk premia for  BIS central bankers’ speeches  5  financial assets and tighter financial market conditions.