Philip R Lane: The yield curve and monetary policy

Speech by Mr Philip R Lane, Member of the Executive Board of the European Central Bank, at the Public Lecture for the Centre for Finance and the Department of Economics, University College London, London, 25 November 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

It is a pleasure to speak this evening at University College London (UCL). In my contribution, I wish to share some thoughts about the yield curve and monetary policy.

UK data offer scholars a unique opportunity to take a very long view: the long-term nominal gilt yields shown in Chart 1 reach all the way back to 1826, the founding year of UCL. Over the past 200 years, gilt yields have never been as low as today. That long-term nominal yields have decreased substantially over recent decades is not specific to the United Kingdom but applies across advanced economies: long-term German yields and euro area overnight index swap (OIS) rates (which are the closest measure of a euro area-wide risk-free rate available) are currently ranging near record lows. Long-term rates in the euro area have even reached negative territory.