1 uk monetary policy: the international context rachel lomax deputy governor, bank of england apcims...
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1
UK MONETARY POLICY: THE INTERNATIONAL CONTEXT
Rachel LomaxDeputy Governor, Bank of England
APCIMS Annual Conference 17 October 2005
2
3
UK import prices
90
95
100
105
110
115
1997 1999 2001 2003 2005
Total imports
Total goods imports excluding oil
Total goods imports
Index 2002 = 100
Source: ONS
4
World GDP* and UK policy rates
Source: IMF, Bank of England calculations
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
1997 1998 1999 2000 2001 2002 2003 2004 2005
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0 Per centPercentage change on a year earlier
World GDP* (lhs)
Policy rate (rhs)
* Weighted by UK export shares
5
World GDP*, UK final domestic demand and UK policy rates
Source: ONS, IMF, Bank of England calculations
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
1997 1998 1999 2000 2001 2002 2003 2004 2005
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0 Per centPercentage change on a year earlier
Policy rate (rhs)
World GDP* (lhs)
Final domesticdemand (lhs)
* Weighted by UK export shares
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World GDP growth
Source: IMF, Bank of England calculations
Percentage change on a year earlier
PPP weighted
UK trade weighted
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1970 1978 1986 1994 2002
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Contributions to World GDP growth World GDP (PPP Weighted)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1995 1997 1999 2001 2003
ROW
China
Euro AreaUS
Percentage change on ayear earlier
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1995 1997 1999 2001 2003
World GDP (UK Trade Weighted) Percentage change on a
year earlierROW
China
Euro AreaUS
Source: Bank of England calculationsSource: Bank of England calculations
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Oil prices – real and nominal
Deflated by M6 export prices*
Nominal
$ per barrel
0
20
40
60
1970 1975 1980 1985 1990 1995 2000 2005
10
30
50
70
Source: Datastream, Bank of England calculations*M6 = G7 countries excluding UK
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Contributions to oil demand growth
Source: IEA
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2000 2001 2002 2003 2004 2005 2006
Rest of the world
Europe
US
China
Forecast
Percentage change on a year earlier
10
Oil price uncertainty
0
20
40
60
80
100
120
1998 1999 2000 2001 2002 2003 2004 2005 2006
$ per barrel
Futures curve, 10 October 2005
Source: Bloomberg, Bank of England calculations
WTI spot price
11
Oil price uncertainty
0
20
40
60
80
100
120
1998 1999 2000 2001 2002 2003 2004 2005 2006
$ per barrel
Futures curve, 10 October 2005
Source: Bloomberg, Bank of England calculations
WTI spot price
Range of Consensus forecasts for January 2006and October 2006 taken on 10 October 2005
12
Oil price uncertainty
0
20
40
60
80
100
120
1998 1999 2000 2001 2002 2003 2004 2005 2006
$ per barrel
Range of Consensus forecasts for January 2006and October 2006 taken on 10 October 2005
Source: Consensus Forecasts, Bloomberg and Bank of England calculations
Options-derived fan chart 10 October 2005
WTI spot price
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Global current accounts
Source: IMF
-800
-600
-400
-200
0
200
400
600
800
1997 2004
Developing AsiaEuro AreaUSMiddle East and AfricaOthers and Statistical Discrepancy
-
-
-
-
$ Billions
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Long-term nominal interest rates
Source: Global Financial Data
0
2
4
6
8
10
12
14
16
18
1960 1965 1970 1975 1980 1985 1990 1995 2000
UK
US
Germany
Per cent
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Long-term real interest rates
1
2
3
4
5
6
7
8
9
1985 1988 1991 1994 1997 2000 2003
UK 5-10 year real forward (derived from index linked gilts)
US 5-10 year nominal forward less survey inflation expectations
German 5-10 year nominal forward less survey inflation expectations
Per cent
Source: Consensus Forecasts, Bank of England calculations
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Bond spreads
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1998 1999 2000 2001 2002 2003 2004 2005
Percentage points
0
500
1,000
1,500
2,000
2,500
3,000
3,500
1998 1999 2000 2001 2002 2003 2004 2005
Asia
Latin America
Emerging Europe
Basis points
Emerging markets sovereignbond spreads
Investment grade corporatebond spreads
Source: JP Morgan Chase & Co Source: Merrill Lynch
Sterling
Dollar
Euro
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UK MONETARY POLICY: THE INTERNATIONAL CONTEXT
Rachel LomaxDeputy Governor, Bank of England
APCIMS Annual Conference 17 October 2005