Ewald Nowotny: The future of monetary policy
Text of the Joint Vienna Institute Lecture by Prof Dr Ewald Nowotny, Governor of the Central
Bank of the Republic of Austria, Vienna, 24 September 2013.
* * *
The financial crisis that flared up in 2008 and whose consequences continue to hold the
world in its grip has severely tested the consensus on monetary policy as it existed prior to
2008. Soon after the onset of the crisis central banks pushed existing tools to their limits and
adopted new types of measures that went far beyond what had been thinkable a few years
ago.
To some extent the scale of the new policies just reflected the scale of the shock that had hit
the economies. In this sense the measures can be considered temporary, one-off extreme
actions taken in reaction to an extreme, one-off crisis event. However, the crisis has also put
serious doubts on some of the basic tenets of monetary policy held before 2008. While there
is still no new consensus around, it is clear that our thinking about how the economy works
and the proper role of monetary policy has changed. This means that even after the acute
phase of the current crisis is over, banks have been stabilized, public finances are back in
order, unemployment has declined and growth has resumed, which may still be well far in the
future, monetary policy will not return to the ways from before 2008.
Monetary policy therefore faces a double challenge. In the short run stability has to be
restored while in the long term an enduring framework has to be established that is capable
of preventing the recurrence of a crisis as the one seen in 2008. Both the immediate and the
longer-term future of monetary policy will be the topic of this paper. The first section focuses
on the policies adopted by central banks in the wake of the crisis. The second section
discusses the exit from these policies and the associated challenges. Finally, the concluding
section provides an outlook on the possible long-term design of monetary policy.
Challenges to pre-crisis thinking
Before discussing the policies that central banks have recently adopted, it might be useful to
recapitulate the way monetary policy had been thought about before 2008. In the decades
leading up to the financial crisis, hand in hand with globalization, the opening of markets for
goods, financial services and capital, economic models converged and so did monetary
policy. The key elements of the consensus were (1) that central banks should focus on one
primary objective, i.e. price stability, and (2) that central banks could perform their function
best when given independent authority over policy. The consensus was based on the belief
that the influence of elected politicians with their presumed short-term focus on re-election
would bias monetary policy towards higher inflation. Monetary policy should thus be
delegated to an autonomous agency with a clearly defined objective of price stability. The
delegation in turn was thought possible because monetary, fiscal and prudential policies
were believed to operate separately, relying on their particular sets of instruments and
exerting only limited influence on the other policy areas, hence requiring a minimum of
coordination. For quite some time the consensus worked fine, seemingly vindicated by a long
period of relatively stable output growth and low and stable inflation, which was labelled the
Great Moderation.
Events since 2008 have disproved the idea of a neat separation of policies. Prudential policy
had been unable to prevent the occurrence of a massive financial crisis, possibly helped
along by unintended side effects of monetary and fiscal policy. A key lesson of the crisis was
then that in the absence of financial stability, monetary policy can be severely hampered and
fiscal policy pushed off track. Re-establishing financial stability in turn can come at a very
high price; and part of it may be achieved through emergency actions and balance sheet
policy of the central bank, again blurring the separation lines between fiscal and monetary
policy.
Using the central bank balance sheet
A few years ago the balance sheets of central banks have been a barely noticed sideshow.
The focus was on interest rate policy. Today, with interest rates close to or at their lower
bound and consequently hardly moving, attention has shifted to what happens in the balance
sheets. After having been stable or growing steadily for years, balance sheets have
expanded massively since the onset of the crisis (Figure 1). Total assets and liabilities
multiplied within a matter of months, rising in total by a factor of three in the case of the
Eurosystem, a factor of above four for the Federal Reserve System (Fed) and close to five
for the Bank of England and the Swiss National Bank. In the euro area and Switzerland the
level has stabilized or even declined over the last year, while in the US and the UK the trend
is still upwards.
One reason for the expansion is that the balance sheet is the main (if not the only) remaining
instrument of central banks when policy rates cannot be lowered further. In fact, however,
balance sheet policy had already played a significant role while interest rates were still well
above their current low levels. In order to understand the logic of balance sheet policy it is
necessary to look at the composition of the balance sheet and the components of the recent
increases.
Figure 1 Figure 2
Assets of the Federal Reserve
Balance sheets of the Fed, the Eurosystem
in billion USD
and the Swiss National Bank
4000
Index, January 2006 = 100
600 3500
3000
500
2500
400
2000
300 1500
1000
200
500
100
0
2007 2008 2009 2010 2011 2012 2013
0
other AIG, Bear Stearns
2006 2007 2008 2009 2010 2011 2012 2013
MBS and agency debt lending to financial markets
Fed
lending to financial institutions Treasuries
Eurosystem
Gold, SDR
SNB
Source: Thomson Reuters.
Source: Thomson Reuters.
Federal Reserve
In the case of the Federal Reserve three phases can be distinguished (Figure 2). In a first
phase, which lasted from early 2008 to early 2009, the balance sheet was mainly driven by
new lending programs designed to support banks that had difficulties accessing refinancing
markets. With the rapid stabilization of US banks, volumes in these operations declined
significantly in 2009 and were soon discontinued.1 Policy focused instead now on the market
for mortgages, badly hit by a crisis in the housing market. Interest rates on mortgages had
not declined to the same extent as policy rates, reflecting higher risk premia. A new program
by the Fed specifically addressed this risk premium by buying up significant amounts of
mortgage-backed securities (MBS).
It is only in the third phase, beginning in November 2010, that US treasuries moved center
stage. In the early months of the crisis, the Federal Reserve had even run down its treasury
holdings and redirected funds to the lending programs for banks. In 2009 some treasury
bonds were bought alongside MBS but only to bring the total up to its pre-crisis level. By then
the main focus of US monetary policy had become the question of how to invigorate a
flagging economy with short-term interest rates already at a historic low. In this context the
purchase of longer-dated US treasuries was hoped to push down the yield curve, driving
down interest rates also in those markets important for private investment and consumption
decisions. Operation Twist, the replacement of short-dated by longer-dated treasuries
announced in September 2011 pursued an essentially similar tactic of decreasing the relative
supply of longer-dated treasuries in the market, driving their price up and their yields down.
In September 2012 the Federal Reserve published an open-ended commitment to buy
USD 40 billion and USD 45 billion worth of MBS and longer-term Treasury securities,
respectively, per month.
Eurosystem
A look at the consolidated balance sheet of the Eurosystem (Figure 3) reveals a few
similarities as well as a number of differences. In the case of the Eurosystem, the main
policy-relevant balance sheet component and also the one essentially driving the size of the
balance sheet are the regular refinancing operations, where banks receive liquidity against
eligible securities. Before the crisis about two-thirds of this liquidity was provided for one
week, while the remainder for three months.
Unlike in the US, the financing of the real economy in the euro area relies extensively on
banks. During the crisis the main policy concern in the euro area was therefore to ensure that
banks would pass on lower policy rates to their customers and remained able and willing to
provide loans to companies and households. Consequently, the Eurosystem lengthened the
average maturity of its refinancing operations to reduce maturity mismatch in commercial
bank balance sheets by first providing larger three-month tenders and later special
operations with one- and even three-year maturities. To assure banks that refinancing will
always be available if needed, limiting the incentives for banks to hoard liquidity and hold
back lending, the Eurosystem switched to a new tender procedure, in which all demands for
liquidity were satisfied at the set policy rate as long as banks can provide sufficient eligible
collateral. This fixed-rate full allotment (FRFA) procedure made the volume of outstanding
liquidity effectively depend on banks' demand. As is visible in Figure 3, volumes fluctuated
significantly, pointing to periods of stress as well as an easing of tensions.
European banks needed refinancing not only in euro but also US dollars and Swiss francs, in
which the euro area is short. In cooperation with the Federal Reserve and the Swiss National
Bank, the Eurosystem consequently set up tender facilities similar to those for euro to
provide foreign exchange. These programs are all very much akin to the lending programs
the Federal Reserve offered to US banks.
Compared to the US, outright purchases of assets play a much smaller role in the euro area.
The covered bond purchase programmes (CBPP) I and II addressed tensions in the market
for covered bonds, which is again very important for bank refinancing in the euro area.
Comparable to the purchase of MBS in the US, the CBPPs addressed risk premia in the
mortgage market in the euro area, if on a much smaller scale than in the US.2 The
differences between the Federal Reserve and the Eurosystem become even more evident
when it comes to the purchase of government securities. While the Fed purchased US
treasuries on a large scale to lower risk-free interest rates, the Eurosystem's Securities
Markets Programme (SMP) was much smaller and targeted towards the debt titles of specific
euro area countries hit by risk premia that were judged to be excessively high. Its economic
logic - reducing risk premia - is thus closer to the MBS purchases in the US rather than to
the purchase of US treasuries.
Figure 3 Figure 4
Assets of the Eurosystem
Assets of the Swiss National Bank
Consolidated balance sheet, in billion EUR
in billion CHF
3500
600
3000
500
2500
400
2000
300
1500
200
1000
100
500
0
0
2007 2008 2009 2010 2011 2012 2013
2007 2008 2009 2010 2011 2012 2013
Gold Foreign exchange
Foreign exchange Domestic CHF repos
Other assets LTRO
Domestic USD repos CHF swaps with foreign CBs
MRO Fine tuning
Lending facility Foreign exchange in EA
Loans to stabilization fund Other assets
Securities for MP purposes
Source: Thomson Reuters.
Source: ECB.
Swiss National Bank
The Swiss National Bank gives another example of balance sheet policy, yet with different
components driving the increase in total assets (Figure 4). In the early phase of the crisis,
until 2009, the SNB also expanded its lending to banks, both in Switzerland and through
swap agreements abroad. As in the US, lending to banks soon declined. In the opinion of the
SNB board, a larger threat to economic stability in Switzerland then came from the Swiss
franc exchange rate, which was being driven up by safe haven flows. The high Swiss franc
was considered dangerous for a small export-oriented economy like Switzerland, harming
economic growth and threatening to push Switzerland into deflation. Consequently, the SNB
intervened in the foreign exchange markets to dampen the appreciation of the franc. On
6 September 2011 the SNB announced that it would "no longer tolerate a EUR/CHF
exchange rate below the minimum rate of CHF 1.20" and was "prepared to buy foreign
currency in unlimited quantities." As can be seen in Figure 4 sizeable interventions were
required between May and July 2012, but since then foreign exchange holdings and total
balance sheet numbers have remained stable.
The Federal Reserve, the Eurosystem and the Swiss National Bank give a good overview
over balance sheet policies since 2008.3 Four observations can be drawn:

First, balance sheet policies have been employed by central banks irrespective of
their rather different intellectual and institutional traditions. Faced with an
unprecedented crisis, central banks have reacted flexibly, using new tools and
instruments as soon as the limits of traditional interest rate policy had become
apparent. Flexibility was key.

Second, policies in the different countries relied on different components of the
balance sheet and affected different markets, mainly because economic and
financial structures differed and so did optimal policies.

Third, differences appear not only between countries but also over time. During the
most critical initial phase, around the failure of Lehman, all central banks focused on
bank refinancing markets. It is only later that policies diverged. In Switzerland the
foreign exchange market was seen as the most important lever for policy; in the US
the markets for mortgage securities and government debt took center stage; while in
the euro area bank refinancing remained crucial, alongside the markets for
government debt of a few countries particularly hit by the sovereign debt crisis.
Again, both similarities and differences between the policies of the major central
banks testify to their flexibility in the design of unconventional policies.
 Fourth, there is no one-to-one relation between the effectiveness of policy and the
size of a change in the balance sheet. The stance of monetary policy as expressed
by the policy rate, with all due caution about differences in the transmission between
various economic areas, can be rather easily compared between central banks, both
in terms of levels (5% is higher than 3%) and changes (lowering interest rates by 2%
is more accommodating than lowering by 1%). This is not the case with balance
sheet policies. Depending on the underlying markets, smaller or larger interventions
might be needed to achieve the same effect in two different countries. In the
extreme case, no change in the balance sheet is needed at all.
The financial crisis holds two particularly interesting examples for that. The first is
the announcement of a maximum exchange rate for the Swiss franc and the
commitment to unlimited purchases by the SNB. While in the month before the
announcement the SNB had bought foreign exchange worth more than CHF 90
billion, after the announcement the pressure immediately eased and the Swiss franc
even depreciated without any sizeable intervention by the SNB in the following
seven months. The second example was the announcement by the ECB of Outright
Monetary Transactions (OMT), again potentially unlimited purchases of securities
issued in particular countries within the euro area. Before the announcement,
financing markets for both European governments and companies had been
characterized by diverging yields and increasing fragmentation along national
borders. As in the case of the Swiss exchange rate, the mere announcement of the
OMT led to a rapid convergence of yields and easier financing conditions for banks
in stressed countries. Again this effect appeared without any purchases actually
undertaken. The effect of balance sheet policies can therefore not be measured by
the changes in the size of the balance sheet alone.
The last observation also draws the attention to the importance of expectations about future
policy, in particular in periods characterized by high uncertainty. The announcements of the
ECB and the SNB removed uncertainty about the future course of policy of the two central
banks and stabilized expectations around the outcome desired by policymakers.
Forward guidance
Guidance on future policy has not only been provided in the form of commitments to
unlimited purchases but also in other domains of monetary policy, in particular the setting of
policy rates. Here again, improved communication about future policy intentions has allowed
for a better aligning of market expectations with policy intentions, typically supporting
accommodative policies. This has reduced uncertainty about the future interest rate path,
stabilized the yield curve, and thus strengthened the effects of short-term interest rate policy.
Forward guidance involves two elements. The first is communication about the central bank's
perception of future economic conditions. The second is communication about the central
bank's reaction to these conditions. Both elements are equally important, yet guidance
practices across central banks have differed remarkably with respect to their emphasis on
either the first or the second element. As an illustration, Table 1 shows the dates and
wordings of recent forward guidance announcements by three major central banks.4
The Fed has introduced threshold-based forward guidance about its interest rate policy in
December 2012. Low-interest policies are announced to be in place until the unemployment
rate falls below a numerical threshold level of 6.5%. Explicit conditionality is introduced by
quantitative and qualitative criteria. Specifically, it is stressed that interest rates could be
increased once inflation is expected to be above 2.5% or inflation expectations no longer
remain well anchored. In June 2013, the Fed also provided date-based guidance about the
tapering of its asset purchase program, revealing its intention to cease new purchases of
Treasury bonds and mortgage-backed securities by mid-2014.
The Bank of England's forward guidance in August 2013 was on both interest rates and
asset purchases at the same time. Akin to the Fed, the Bank of England provides
thresholdbased guidance with a numerical target for the unemployment rate. Both the announced
interest rate and asset purchases policies are subject to the same (quantitative and
qualitative) knockout criteria, which include risks to price stability and financial stability.
The ECB, in turn, has provided qualitative open-ended guidance, not referring to any explicit
threshold or date that will likely lead to the termination of the accommodative policy stance.
The conditionality of the ECB guidance is not linked to a numerical threshold for inflation, but
more broadly to changes in the outlook for price stability.
Both quantitative and qualitative guidance have their relative merits, and both face
challenges. First, forward guidance must be clearly understood by the public to be effective.
To this end it must neither provide too much information, which may confuse market
participants about the central bank's policy intentions, nor provide too little information, which
may increase the risk of misunderstandings. Finding the right balance is particularly difficult
for policymakers at the center of the public debate, be it in the United States, in Europe, or
elsewhere. Their exact choice of wordings typically gives rise to extended debates in the
financial media, which often involves serious misinterpretations. A recurrent example is that
simple statements about positive economic developments are misinterpreted as indications
of imminent increases in the interest rate. Second, forward guidance must be credible. On
the one hand, this requires that market participants have confidence in the central bank's
assessment of future economic conditions, that is, economic forecasts must continue to be of
the highest quality. On the other hand, policy intentions must be time-consistent. This is
guaranteed in the current practices by the conditional nature of forward guidance
announcements, giving central banks the necessary room to react to unanticipated market
and economic developments.
The medium term: eventual exit from unconventional policies
Unconventional monetary policy measures have been of the utmost importance to strengthen
accommodative monetary policy, and they will continue to be an important policy tool as long
as the economy is in troubled waters. Yet it is clear that central bank balance sheets cannot
grow forever. In the medium term, when the economy is back on track and solid growth is
restored, some unconventional measures will have to be reversed. This eventual exit will
pose unprecedented challenges to central banks, and it is our responsibility to prepare for
these challenges well in advance.
The following three aspects are particularly relevant. First, we must find the adequate timing
and sequence of actions. Second, we must ready the public for the eventual exit by carefully
communicating our exit strategy. Third, we must take into account potential international
spillover effects of our policies. Given the strong international linkages of banks and financial
markets, monetary policy changes in one major currency area can have significant global
effects.
Timing
Finding the right timing is the first key challenge when exiting unconventional policies. Exiting
too early or too fast may create risks to economic growth and employment. Exiting too late or
too slowly may create risks to price stability, both over the short and the medium term, and
distort the private sector's incentives to continue balance sheet repair. Exit strategies thus
need to be designed in a cautious manner. They must be flexible to respond to changing
economic conditions. They must involve gradual and steady adjustments rather than
occasional and disruptive action. They must provide the right incentives.
Of particular importance to the design of exit strategies is also the initial composition of a
central bank's balance sheet. As outlined in greater detail before, the Fed's quantitative
easing program mainly relies on large-scale asset purchases, especially purchases of
mortgage-backed securities and Treasury bonds. The exit strategy will therefore have to
incorporate a detailed state-contingent plan that formulates when, or under what conditions,
purchases of new assets in either asset class will cease and existing portfolios will be sold
off. As indicated by the disruptions following the Fed announcement in June, market
participants expect that these actions will have significant impacts on asset prices and thus
the overall economy. Moreover, finding the adequate sequence of reversing actions will be
critical to keeping disruptions in asset prices to a minimum, and to ensuring the stability of
the financial system.5 For the design and success of the Fed's exit strategy, precise a priori
knowledge about the macroeconomic impact of different reversing options thus seems to be
essential.
The ECB's response to the crisis has focused on the establishment of new credit easing
policies. Most notably, enhanced repurchasing operations have been introduced to provide
the banking system with sufficient liquidity. As stated above, compared to the United States,
the supply of liquidity in the euro area adjusts more endogenously to banks' demand for
liquidity, and the ECB's assets are of shorter maturity than the Fed's assets. These features
will facilitate reversing unconventional policy measures in a gradual and careful way, while
monitoring the health of the financial system. It will also allow us to respond quickly to
unexpected disruptions. Exiting from unconventional credit easing policies may thus be
easier than exiting from large-scale asset purchases. But this by no means implies that the
exit will be easy. We too must carefully decide on when, how fast, and in what order the
unconventional measures - including our commitments to provide virtually unlimited liquidity
to banks and secondary markets for government debt - shall be reversed. We too must
correctly anticipate the implications of different reversing options for macroeconomic and
financial stability. These are obviously difficult tasks given the lack of past experiences. Yet I
have no doubt that we will successfully master these difficulties.
Forward guidance on exit
The second key challenge is to ready the public for an eventual exit from accommodative
policies. Striking the right balance between clarity and transparency will be especially difficult
in this context because the exit process will likely expand over an extended period of time.
Communication of future policy actions will thus be complex. Formulating adequate
conditionality concepts a priori will be particularly difficult, and it may become desirable to
adapt conditions along the way. This creates additional risks to the central bank's reputation
and credibility: Changes in guidance could be perceived as a deviation from existing policies
rather than a clarification of existing policies. To keep these risks to a minimum, we need to
choose forward guidance practices carefully from the start, so that sizeable revisions do not
become necessary later.
Global liquidity and international spillover effects
Finally, our exit strategies must also take into account potential international spillover effects.
Banks operate on a global scale, and their decisions on funding and credit today are global in
private global liquidity
nature. The created by the financial sector is a key determinant of
funding conditions in the broader international economy, in addition to the official global
liquidity provided by central banks.6 The accommodative policy stance over the past years
has contributed to easy financing conditions not only in the crisis countries but also in
countries with stronger economic conditions. Many argue that today, global banks searching
for yield in a low-interest rate environment show signs of excessive risk-taking and
weakening lending standards in some of these economies, most notably in emerging market
economies.
Global liquidity thus poses at least two further challenges to monetary policy in the advanced
economies. First, continuing an accommodative stance for too long may increase
problematic international liquidity spillovers, and may eventually contribute to a build-up of
systemic risks unless addressed by prudential measures. Second, an unexpected early exit
may cause a sharper and quicker than expected tightening of financing conditions in
emerging markets, causing sudden reversals of cross-border capital flows and disruptions in
financial markets. Our exit strategies must take into account these potential side effects.
The long term: a new framework for monetary policy
Regarding the future of monetary policy in the long term, the main question is: How close will
monetary policy return to the pre-crisis framework? As of today, opinions on this question
vary greatly. Some in favor of reversing the latest innovations argue that these have moved
the central bank more into political territory, raising concerns about the clarity of price stability
mandates or about democratic legitimation. Others argue that the crisis has forcefully
demonstrated that our initial model, with its clear separation of monetary and financial
stability policies, has not delivered on its promises and should be fundamentally
reconsidered. Eventually, the most probable outcome is that some, but not all, recent
innovations will be part of the future monetary policy framework.
One innovation that will survive is the integration of prudential policy tools. The recent crisis
has highlighted that financial sector stability is a necessary precondition for macroeconomic
stability and vice versa. Micro- and macroprudential policy tools that seek to guarantee a
strong financial system thus interact with monetary policy tools that seek to stabilize the
macro economy. This interdependence is a valid argument for coordinating prudential and
monetary policy. The recent establishment of the Single Supervisory Mechanism within the
ECB has been an important step in this process. On the other hand, taking up supervisory
tasks may expose a central bank to massive reputational risks. In my view, no central banker
with an adequate survival instinct will seek actively a larger role in banking supervision,
especially microprudential supervision. So the specific form of institutional arrangements has
to play a decisive role.
A further innovation that may well be important in the future framework is increased
international cooperation. Central banks' holdings of foreign currency assets have risen
sharply in recent years. Reasons for this development include exchange rate stabilization,
insurance against a destabilizing run on the domestic currency, or a desire to retain the
ability to provide foreign currency liquidity to the domestic economy. On a global scale, these
benefits have to be weighed against significant costs implied by foreign exchange
accumulation. Externalities are imposed on other countries due to distortions of international
asset prices, and accumulating central banks become increasingly subject to exchange rate
and valuation risk, and to the risk of capital losses. Among the euro area members these
costs are still relatively low, since the pooling of foreign exchange and gold reserves within
EMU has led to significant efficiency gains. For emerging economies, however, costs are
significant. This is reflected also in the recent initiative of the BRICS countries to create the
Contingent Reserve Arrangement, a currency reserve fund pooling foreign exchange
holdings worth USD 100 billion.7 If the trend of reserve accumulation continues, global
cooperation of central banks may become increasingly desirable since it reduces the
precautionary incentive for central banks to hold foreign reserves and thus the associated
costs. Formal arrangements, such as swap lines between central banks, have the potential
to consistently prevent shortages of liquidity in foreign currencies. Given their success during
the recent crisis, they may well become a more permanent element of the international
monetary policy framework.
Table 1
Recent forward guidance practices
Central Bank Date Wording
Federal Reserve (...) this exceptionally low range for the federal funds rate will be appropriate at
December 20128 least as long as the unemployment rate remains above 6-1/2 percent, inflation
between one and two years ahead is projected to be no more than a half
percentage point above the Committee's 2 percent longer-run goal, and
longerterm inflation expectations continue to be well anchored.
June 2013 "(...) the Committee currently anticipates that it would be appropriate to moderate
the monthly pace of purchases later this year. And if the subsequent data remain
broadly aligned with our current expectations for the economy, we would continue
to reduce the pace of purchases in measured steps through the first half of next
year, ending purchases around midyear (...) our policy is in no way predetermined
and will depend on the incoming data and the evolution of the outlook as well as
on the cumulative progress toward our objectives."
Bank of England The MPC intends not to raise Bank Rate from its current level of 0.5% at least until
August 20139 (...) the unemployment rate has fallen to a threshold of 7% (...)The MPC stands
ready to undertake further asset purchases while the unemployment rate remains
above 7% if it judges that additional monetary stimulus is warranted.
The guidance (...) would cease to hold if any of the following three "knockouts"
were breached:
(i) in the MPC's view, it is more likely than not, that CPI inflation 18 to 24
months ahead will be 0.5 percentage points or more above the 2%
target;
(ii) medium-term inflation expectations no longer remain sufficiently well
anchored;
(iii) the Financial Policy Committee (FPC) judges that the stance of
monetary policy poses a significant threat to financial stability (...).
ECB (...) our monetary policy stance will remain accommodative for as long as
necessary. The Governing Council expects the key ECB interest rates to remain
July 201310
at present or lower levels for an extended period of time. This expectation is
based on the overall subdued outlook for inflation extending into the medium term,
given the broad-ba