Financial Policy Committee Record – April 2025
Our Financial Policy Committee (FPC) meets to identify risks to financial stability and agree policy actions aimed at safeguarding the resilience of the UK financial system.
Financial institutions
Do central bank reforms lead to more monetary discipline?
This paper investigates the impact of reforms altering legal central bank independence (CBI) on monetary policy discipline and credibility, two key mechanisms shaping price stability. Using a sample of 155 countries over more than 50 years (1972–2023), we show that reforms improving CBI strengthen monetary discipline and the credibility of central banks. Larger reforms enhance monetary discipline with a lag, achieving their full effect after ten years. Central bank reforms have a greater impact on monetary discipline in countries that have not reversed earlier reforms.
Do central bank reforms lead to more monetary discipline?
This paper investigates the impact of reforms altering legal central bank independence (CBI) on monetary policy discipline and credibility, two key mechanisms shaping price stability. Using a sample of 155 countries over more than 50 years (1972–2023), we show that reforms improving CBI strengthen monetary discipline and the credibility of central banks. Larger reforms enhance monetary discipline with a lag, achieving their full effect after ten years. Central bank reforms have a greater impact on monetary discipline in countries that have not reversed earlier reforms.
PRA launches consultation to help insurers accelerate investment in the UK
The proposals for a Matching Adjustment Investment Accelerator (MAIA) look to reduce barriers to rapid investment by insurance firms.
FEDS Paper: Energy Consumption and Inequality in the U.S.: Who are the Energy Burdened?
Octavio M. Aguilar and Cristina Fuentes-AlberoUsing a broad definition of energy consumption that includes both residential energy use and gasoline for transport, we identify 20% of households in the PSID as energy burdened (EB) based on a twice-the-median, income-based threshold. Logit analysis shows that being nonwhite, being single with dependents, receiving public assistance, having no post-secondary education, and being unemployed increase the probability of being EB.
Minutes of the SONIA Stakeholder Advisory Group - 20 March 2025
The SONIA Stakeholder Advisory Group supports the Bank’s administration of SONIA by providing advice and technical input to the Bank and the SONIA Oversight Committee
Interest rate control and the transmission of monetary policy
We study how short-term interest rate volatility affects the transmission of monetary policy. To identify exogenous changes in volatility, we exploit the pronounced heteroskedasticity visible in the time-series of euro area short-term rates over the past two and a half decades. Interacting the exogenous variation in volatility with high-frequency-identified monetary policy shocks, we find that increases in volatility dampen the effects of monetary policy on output and prices.
PRA takes action against a former Notified Non-Executive Director of Wyelands Bank Plc for breaches of the PRA’s Individual Conduct Rule 2
The Prudential Regulation Authority has fined Mr George Jay Hambro, a former Notified Non-Executive Director of Wyelands Bank Plc, £72,000 for breaching Individual Conduct Rule 2 in relation to three matters between 3 July 2017 and 19 February 2020. Mr Hambro has expressed regret for his failings.
Interest rate control and the transmission of monetary policy
We study how short-term interest rate volatility affects the transmission of monetary policy. To identify exogenous changes in volatility, we exploit the pronounced heteroskedasticity visible in the time-series of euro area short-term rates over the past two and a half decades. Interacting the exogenous variation in volatility with high-frequency-identified monetary policy shocks, we find that increases in volatility dampen the effects of monetary policy on output and prices.
Word2Prices: embedding central bank communications for inflation prediction
Word embeddings are vectors of real numbers associated with words, designed to capture semantic and syntactic similarity between the words in a corpus of text. We estimate the word embeddings of the European Central Bank’s introductory statements at monetary policy press conferences by using a simple natural language processing model (Word2Vec), only based on the information and model parameters available as of each press conference. We show that a measure based on such embeddings contributes to improve core inflation forecasts multiple quarters ahead.
Pages
