In these circumstances, monetary policy in maintaining price stability on a medium term perspective, contributes also to reduce the output gap, as the literature on flexible inflation targeting has shown long ago. 9 With risks to inflation well-contained, the ECB has lowered its policy interest rate to the historic low level of 0.75% and provided banks with access to unlimited liquidity at this price. However, before September this year, the transmission of our policy rate to the real economy was seriously disrupted across countries. For instance, when the ECB cut interest rates by 125 basis points between November 2002 and August 2003, lending rates to non-financial corporations across euro area countries responded homogeneously. By contrast, following the 75 basis point cuts implemented between October 2011 and July 2012, the range of bank lending rates across the euro area widened significantly. Indeed, in some countries interest rates for non-financial corporations actually increased. In an economy like the euro area where more than two thirds of firms’ financing comes from banks, a disruption in monetary policy transmission has material effects for investment and employment. But this effect is particularly exaggerated when countries are simultaneously undertaking large fiscal and structural adjustment. Indeed, it was the countries with the greatest adjustment needs that were being most cut off from monetary policy support. They were at risk of entering a vicious circle of rising interest rates, falling growth and deteriorating public finances. It was against this background that the ECB introduced its programme of Outright Monetary Transactions, or OMTs.

Norhana Endut: Keynote address at the Malaysian Financial Planning Council Keynote address by Ms Norhana Endut, Assistant Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Malaysian Financial Planning Council, Kuala Lumpur, 5 November 2022. *** It is my great pleasure to be here today at the 9th MFPC Graduation Ceremony. First of all, I wish to congratulate all successful graduates from the Class of 2019 to 2022. I am sure many of you have been waiting for this ceremony as it was postponed due to the pandemic since 2020. The critical role of financial planning is often overlooked. But one lesson that we can take from the recent pandemic and economic crisis is that a sound financial management and planning is critical in weathering the storm. It is your role now as Registered Financial Planners and Shariah Registered Financial Planners to take the stage in helping Malaysians manage and rebuild their financial standing post-pandemic and be prepared for the future. The Malaysian economy has recorded a strong growth momentum following the reopening of all the sectors in the economy this year. Key to this is the improvements in labour market, in particular, income growth. While there are reasons to be optimistic about the growth momentum, next year presents a more challenging outlook to the global economy with rising global inflationary pressures, signs of moderation in growth in several major economies, ongoing geopolitical conflicts and highly volatile financial markets. Malaysia is certainly not insulated from some of these headwinds.