In other words, in the absence of further disturbances to the economy or the emergence of new and unanticipated threats to price stability, this level of interest rate is considered to be consistent with the primary objective of maintaining price stability over the medium term. Our announcement helped to resolve some uncertainty at a time when the practical, technical and logistical tasks required by the changeover weekend were uppermost in our minds and in those of market participants. The first main refinancing operations of the Eurosystem were successfully settled. While paying due attention to the uncertainties related to the phasing-in of the new system, the decisions were taken on the basis of the liquidity conditions prevailing in the euro area money market as a whole. In addition to the refinancing operations, the Eurosystem offers standing facilities, which can be accessed by credit institutions via the NCBs. The deposit and marginal lending facilities constitute, in normal circumstances, the upper and lower bound for the overnight market interest rate. As a transitional measure, the Governing Council of the ECB had narrowed the corridor established by the interest rates on the Eurosystem’s standing facilities from 4 January until 21 January 1999. The intention was to facilitate the necessary adjustments to the new institutional environment resulting from the transition to Stage Three. BIS Review 9/1999  –6–  At its last meeting, the Governing Council of the ECB confirmed its earlier assessment of the outlook for price stability.

Recent research highlights that episodes of financial stress are more likely to be associated with deeper and longer downturns. This is particularly true for banking-related financial stress, and helps explain the severity of the recent crisis. Another factor that exacerbated the fallout from the recent crisis was the aggressive use of certain financial instruments. While derivatives can be effectively used for hedging purposes, use of these instruments for speculative gains with high leverage also allows for potentially unlimited losses. BIS Review 123/2009  1  The global recession was another distinctive feature of the recent crisis. The downturn in economic activity was virtually synchronized across both advanced and emerging economies. Increasing interdependence owing to the rapid pace of globalization, as well as the rising contribution of emerging economies to global growth is among the main factors behind the synchronous behavior of global economic activity. Taken together, this implies that there may be less of a role for exports during the recovery. Also the unprecedented fiscal and monetary policy initiatives implemented across major economies makes this crisis truly unique. The awareness regarding the threat to financial and economic stability has emerged across both advanced and emerging economies. To this end, policy dialogues – particularly those fostered during international forums – served to catalyze simultaneous fiscal stimulus packages across some of the largest advanced and emerging economies. On the monetary policy side, at first, many economies cut interest rates sharply with waning inflationary pressures.