Carney Says BOE Policy `Needs to Walk, Not Run, to Stand Still'

The video tutorial explains the concept of the equilibrium interest rate, which maintains output at potential and inflation at target. It discusses how the equilibrium rate is influenced by structural factors like productivity and demographics, as well as short-term forces such as uncertainty. The tutorial also evaluates the recent stance of monetary policy, noting that despite low Bank rates, the policy has been mildly accommodative. It concludes with guidance on future rate rises, emphasizing that they will be limited and gradual due to persistent structural factors and slowly fading short-term headwinds.

What is the primary role of the equilibrium interest rate in an economy?

• To maintain output at potential and keep inflation at target

• To control the stock market

• To increase government revenue

• To directly set monetary policy

Which of the following is a structural force affecting the equilibrium interest rate?

• Private deleveraging

• Uncertainty

• Productivity

• Public spending

How have structural and shorter-term forces affected the equilibrium interest rate?

• They have stabilized it

• They have pushed it down further

• They have had no impact

• They have increased it significantly

Why are rate rises expected to be limited and gradual according to the transcript?

• Due to the persistence of structural factors and gradual fading of shorter-term factors

• To increase inflation quickly

• Because the economy is growing rapidly

• To decrease unemployment immediately

What is the expected trend for the equilibrium interest rate in the future?

• It will decrease rapidly

• It will remain constant

• It will fluctuate wildly

• It will rise gradually