Ingimundur Friðriksson: Monetary policy and its implementation Speech by Mr Ingimundur Friðriksson, a Governor of the Central Bank of Iceland, at a Roundtable meeting held at the Central Bank of Iceland, Reykjavik, 20 February 2007. *  *  *  The interest rate decision on February 8, 2007 On Thursday, February 8 this year the Central Bank of Iceland announced that the Board of Governors had decided to leave the policy interest rate unchanged at 14.25%. A press release announcing the decision stated that inflation had slowed down and the short-term inflation outlook had improved beyond what was expected in the Central Bank’s most recent forecast. 1 However, inflation was still significantly in excess of target. The current interest rate might suffice to bring inflation to target within an acceptable period of time, but significant macroeconomic imbalances were still present that posed a risk of rising inflation. If the inflation outlook took a turn for the worse, the Central Bank would respond. Monetary policy and macroeconomic developments In the joint declaration by the Government of Iceland and the Central Bank of Iceland on March 27, 2001, the Bank was assigned the main objective of promoting price stability. This was defined as a rate of inflation, measured as the twelve-month increase in the CPI, of as close to 2½% as possible. Broadly speaking, central banks have only a single instrument, i.e. their policy interest rate, and can therefore only attain one macroeconomic goal in the long run.

The next phase of the NGFS' work will develop guidance on transition planning to cater to different supervisors' mandates, toolkits, and prudential frameworks. Recognising that there is a spectrum of supervisory mandates, such guidance will be based on a building block approach to aid financial regulators with varying approaches in their review of financial institutions' transition plans or planning process. Scaling blended finance To move the needle on global emissions, we need to facilitate the decarbonisation of emerging markets and developing economies. Emerging markets and developing economies account for more than half of global greenhouse gas emissions. They are still heavily dependent on fossil fuels for their economic development and energy needs. Their energy needs are expected to grow significantly in the coming years alongside economic growth and development. It is not right to hold back their economic growth. Rather, we need transition finance to help decouple growth from emissions – through cleaner energy, greater energy efficiency, more electrification, and production processes with a lower carbon footprint. But emerging economies and developing countries face several challenges in mobilising the transition financing necessary for decarbonisation. First, they have fiscal constraints. Public debt remains the main source of funding for transition in these economies. But there are tight limits to how much debt these governments can sustainably raise, especially in foreign currencies. 3/5  BIS - Central bankers' speeches  Second, they have limited access to private capital. They lack depth in their domestic capital markets; they lack large corporations, and a broad investor base.