The speech starts by setting out some context for the discussion. It notes that global markets seem to have ‘regained composure’ after a period of heightened volatility and increased risk aversion in the opening weeks of the year. It suggests that this, in part, reflected the fall in commodity prices and the sense that the economic growth outlook was a bit softer than previously assumed. It then moots that the period posed a number of questions for policymakers. Was the turbulence a signal about a new shock to the global economy? Was it a global shock in itself? Or was it just a temporary bout of market nervousness?

The speech goes on to suggest that even if the recent volatility was not a reflection of fundamentals, it is worth ensuring that all the information has been extracted from it and that the big policy questions that are ‘lurking’ have been considered, as they may play a role in future bouts of market nervousness.

To that end, the speech runs through a range of issues that policymakers and markets should consider. It starts with the decline in market liquidity, and poses the question of how liquidity will stand up under genuine stressed conditions.

Second, the speech discusses the unconventional monetary policies put in place by central banks globally in response to the financial crisis, and their impacts. The speech then looks at the consequences of a lengthy period of ultra-low interest rates. For savers, this circumstance could mean that the whole set of assumptions embodied in retirement income plans are called into question. It is critical for policymakers to encourage sustainable growth that will generate decent returns on the capital stock, through means other than ultra-expansionary monetary policy. The speech also notes practical issues with recent discussions surrounding the idea of ‘helicopter money.’

The speech suggests that ‘it all comes back to growth’ and that it is important to consider the question of whether trend growth is lower. If trend growth is lower, one option we have is to accept the lower growth and reconfigure our expectations of future incomes. Alternatively, we can aim to achieve a better outcome by intensifying our efforts to address the things that may be unnecessarily restraining current and future growth.

The speech concludes by reiterating the importance of keeping a strong focus on durably lifting growth prospects and noting that policies beyond central bank actions need to do more in this regard.

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