Deciphering Delphic Guidance: The Bank of England and Brexit
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Summary:
In response to the 2016 referendum on EU Membership and the ensuing uncertainty as to the eventual consequences of Brexit, the Bank of England (BoE) adopted various methods of influencing market rates, including conventional, unconventional monetary policy measures and communications on forward guidance. To investigate the effectiveness of BoE’s communication, we first decompose long-dated yields into a risk neutral and term premium component. Text-based analysis of Monetary Policy Committee minutes is then used to measure the stance of policy, attitudes to QE and Brexit. We show that the Bank’s communication strategy acted to complement the stance of monetary policy, which had responded by lowering Bank rate and expanding QE, and acted to lower the term premium that might otherwise have risen in response to Brexit uncertainty.
Series:
Working Paper No. 2024/160
Subject:
Financial services Monetary policy Unconventional monetary policies Yield curve
Frequency:
regular
English
Publication Date:
July 19, 2024
ISBN/ISSN:
9798400284649/1018-5941
Stock No:
WPIEA2024160
Format:
Paper
Pages:
43
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