In particular, it has led to a “search for yield” by investors who have been seeking more profitable and riskier investments. This is evidenced at least by three facts: increasing leverage, the high share of debt at risk and the relatively high valuations of certain assets. Now the current phase of ultra-loose monetary policy is coming to an end. In the US, after seven years of interest rates around the zero lower bound, monetary policy is being normalised. Other advanced economies, such as the UK or Canada, have also started to raise interest rates. Regarding the euro area, the ECB Governing Council anticipates that, subject to incoming data confirming the medium-term inflation outlook, net asset purchases will come to an end in December 2018. In this context, two main developments in international financial markets warrant attention as, in my view, they might currently pose key threats to financial stability and global growth. First, the economic and financial situation of some emerging markets is under pressure as a result, among other factors, of the combination of monetary policy normalisation and strong fiscal stimulus in the United States. Last summer financial conditions in most emerging market economies were tightened, giving rise to considerable outflows and steep exchange rate depreciations, particularly in Argentina and Turkey. This sharp market reaction should be a reminder of the risks that the normalisation of monetary policy at the global level could entail, in particular for those countries that have accumulated macroeconomic imbalances.

29.11.18  Opening remarks 2nd Annual Meeting CEBRA International Finance and Macroeconomic Program Pablo Hernández de Cos Governor  Ladies and Gentlemen, It is a great pleasure for me to welcome you all to the second annual meeting of the CEBRA (Central Bank Research Association) International Finance and Macroeconomics Program, hosted by the Banco de España. Let me first thank our colleagues from CEBRA for their efforts in co-organising this conference. CEBRA is an association that seeks to encourage applied and theoretical research on relevant topics for central banks, among other institutions. Its research programmes foster interaction among researchers at central banks and in academia. In this vein, the International Finance and Macroeconomics Program (IFM) led by Galina Hale provides an excellent forum to discuss key policy questions that are also relevant to academia. The title of this conference is: “Risk, volatility and central bank policies”. Allow me to briefly share with you –from a central banker’s perspective– some of our current concerns in relation to the three items highlighted in this title. Starting with risks, in recent months some institutions – including the Banco de España through its Financial Stability Report – have stressed that, although the financial stability environment remains favourable, global near-term risks have increased or have begun to materialise. In recent years the global economy has experienced a period of sustained and across-theboard growth, supported by unprecedented expansionary and unconventional monetary policies around the world. But this context has also been conducive to the accumulation of certain financial vulnerabilities.