Most worryingly, we seem to be confronted with a trade-off between price stability and financial stability, at least in the short term. To borrow a phrase from a recent award-winning movie, everything seems to be related; there are financial vulnerabilities everywhere; and economic and financial shocks seem to happen all at once. Okay, that sounds exaggerated, but I think you get my drift. As with the multiverse, there is much that we do not know about the complex interactions between the real economy and the financial system and their implications for price and financial stability. But policymakers are not entirely clueless. Let me set out four key propositions based on the experience of the last decade: securing both monetary and financial stability requires an integrated framework, combining monetary policy, fiscal policy, and macro-financial policies;  financial sector vulnerabilities are best addressed using a variety of macro-financial policy tools in a coherent manner; monetary policy should remain focused on inflation control but its implications for financial stability must be taken into account; fiscal policy plays an important role in helping to secure both price stability and financial stability; Let me elaborate on each of these. AN INTEGRATED POLICY FRAMEWORK First, securing both monetary and financial stability requires an integrated framework, combining monetary policy, fiscal policy, and macro-financial policies. Macro-financial policies include macroprudential measures, foreign exchange intervention, and capital flow management measures. There are three reasons why we need an integrated policy framework. One, there are important interactions between monetary policy and the financial system.

Moreover, risk related to borrowers has diminished as the economic recovery has progressed and debt levels have fallen; indeed, at the end of 2015, total private sector debt was down to around the level last seen in 2000. Financial system risk is assessed four times a year by the Systemic Risk Committee and the Financial Stability Council, greatly increasing the monitoring that takes place. The Central Bank publishes its Financial Stability report twice a year, with the next issue forthcoming on 20 April. I will not expand further on this here. BIS central bankers’ speeches  5  However, I think it appropriate to mention four issues that, in the near future, could have a major impact on long-term developments in the financial system. The first is technology, which is advancing rapidly worldwide. In addition, we are engaged in renewing many of Iceland’s key financial market infrastructure elements and, in doing so, adopting new technology. This could create excellent opportunities to enhance security and reduce costs, including through joint utilisation of infrastructure elements, while increasing competition in areas where economies of scale are less in evidence. The Bank’s Financial Market Infrastructure report, to be published later this year, will discuss this in greater detail. The next is culture and ethics. In international discussion, it is widely emphasised that postcrisis reform will not achieve its goals in the long run unless it involves an improvement over the pre-crisis situation. It seems to me that considerable improvements have already been made here in Iceland.