A Bank of England paper published on Tuesday says taking note of precautionary saving motives justifies an accommodative policy bias in the face of persistent and adverse disturbances.

Bianca De Paoli and Pawel Zabczyk, the paper's authors, use a New Keynesian model to analyse the conduct of monetary policy in an environment in which cyclical swings in risk appetite affect households' propensity to save. They note that linear models used in monetary policy decisions ignore households'