Money And Credit, Twelve Months On

As many people have said, this is a challenging time for policymakers. But the real challenge is for households and firms in the real world who are having to navigate the fallout from the extraordinary combination of financial and commodity shocks rippling through the world economy. Our job as policymakers is to make that process as smooth as it can be over the medium term. And having our eye on the medium term means we must ensure that the gains of the past 10–15 years in stabilizing inflation are not frittered away. In confronting that task, policymakers are having both to make big picture judgments about the balance of forces buffeting the UK economy, and to apply areas of economic theory that stretch the frontiers of existing research. So, I want to sketch, broadly, what the current conjuncture suggests, from the policymaker's perspective, should feature in the future research agenda of monetary economists.