Michael Saunders talked about “Some Monetary Policy Options – If More Support Is Needed” in a speech. He said, “My judgment at present is that the ELB (effective lower bound) for the UK is probably a little below zero, provided appropriate mitigations (eg reserve tiering, bank funding scheme) are in place”. Though, there is “considerable uncertainty over its exact level”, which has several implications.
Firstly, “monetary policy space is still relatively limited. Secondly, “further asset purchases by themselves may be less effective in providing additional stimulus”. Thirdly, “forward guidance can probably only achieve modest extra support”. Fourthly, while there maybe scope to cut Bank Rate further, the approach “should take account of ELB uncertainty”. Fifthly, “complementarities and synergies between policy instruments matter more than usual.”
