But it is not clear to me what this would be intended to achieve. Apart from the simple fact that the Bank is already in the market every week offering to buy corporate bonds, and we have been doing that for nearly four years, this aspect of the capital markets is functioning well in terms of providing credit to businesses. Any firm that has an issuance programme – typically the larger firms with credit ratings – can issue whenever and whatever bonds they choose at historically low interest rates. The backstop to corporate bonds provided by the Bank’s operations is still there – but it is not being used much because it is not needed. The power to intervene in credit markets is one to use cautiously. Any intervention by the public sector carries the risk of creating distortions. Usually, we intervene because there is a demonstrable failure of private markets – so that the central bank is undoing distortions caused by other factors. Buying private sector paper also carries the risk of credit losses – ultimately of public money. And it is a very short step to cross the boundary from seeking to improve credit supply generally to determining the credit allocation between individual borrowers – which the central bank is neither equipped nor empowered to do. That is best left to private markets. When a central bank – or any public authority – takes actions, it has to remember that the precedent of that action can be as powerful as the action itself.
Bank of England consolidated balance sheet(a) Chart 1: Liabilities  Chart 2: Assets £ billions 450  £ billions 450 Other assets  Other liabilities  400  Reserve balances Notes in Circulation  400  Loan to APF (QE)  350  Short-term repos  350  300  Long-term repos  300  250  250  200  200  150  150  100  100  50  50 0  0 2007 (a)  2008  2009  2010  2011  2012  2013  2007  2008  2009  2010  2011  2012  2013  Weekly data to 13 February 2013  In addition to controlling the size of our balance sheet and/or the price of money, which may affect the total supply of credit in the economy directly, we can alter the composition of the assets held on the Bank’s balance sheet, or conduct off-balance sheet operations, and so affect the composition of private sector asset holdings. Executed judiciously, we can thus influence the price and/or quantity of particular types of credit in the economy. Finally, by talking about what we might do in the future, the Bank can influence the price and quantity of money and credit for some time to come. The power of communications as an operational tool should not be underestimated and the MPC has always used a range of communication channels to help accomplish its objectives.