has been expressed that an expanded role by central banks in this direction could compromise their independence that is so critical in defending their primary objective of price stability. that may indeed be a risk. but precisely because central banks are generally among the most independent institutions, they can strengthen the independence of the supervisory environment. the risk of political pressure delaying a needed tightening in credit conditions via macro - prudential tools, for example, can be minimised if the central bank has a key role. in my view, this benefit, together with the benefit of informational synergies, outweigh the risks. * * * i close with a very old lesson for central banks : humility. this crisis was not just a once - in - ageneration crisis. it proved to be much worse. i hope subsequent relative calm allows our 22nd century counterparts to characterise this as a once - in - a - century event. but central banks must not let their guard down. the next crisis might well challenge the limits of our knowledge in new and as yet unknown ways. references williams, john c. ( 2009 ) “ the risk of deflation ”, frb san francisco economic letter, 12, 27 march. bis central bankers ’ speeches bis central bankers ’ speeches

monetary policy is not just about determining current and future overnight interest rates. as both practical experience and also earlier generations of academics have taught us, there is much more to monetary policy. prior to the crisis, some were concerned about the zero bound on short - term nominal rates. however, the large array of unconventional measures employed successfully by various central banks around the world to engineer further policy easing has dispelled the fear that the zero bound is like hitting a wall, rendering monetary policy helpless. the management of a central bank ’ s balance sheet has been understood as an important policy tool. we have also learned, in some cases while forced to innovate on the way, about operational aspects i would like to note that the views i express are my own and do not necessarily reflect views of my colleagues on the governing council of the european central bank. see also the instructive analysis by john c. williams, the newly appointed president of the federal reserve bank of san francisco, who has examined the role of well - anchored inflation expectations for containing deflation risks in the us ( williams, 2009 ). bis central bankers ’ speeches that matter for policy. examples include the collateral framework and the list of counterparties. in revised editions of central banking textbooks, i expect to find discussions of these things that were absent from the pre - crisis editions. * * * there have also been lessons about the strategy of monetary policy. in my view, the crisis has reaffirmed the danger associated with the temptation to fine tune the real economy, in addition to maintaining price stability. one way to pose this debate is by contrasting two views. the first, the stability oriented approach, can be characterised as attempting to dampen economic fluctuations by promoting stable economic growth over time, subject to the primary focus on price stability. the second, the activist view, can be seen as suggesting that, in addition to price stability, an equally important goal of monetary policy is to actively guide the economy towards attainment of its “ potential. ” that is, an important guide to policy is the “ output gap ”, which measures how far gdp deviates from its potential. but policy activism in this sense can be dangerous. trying too hard to close real activity gaps can lead to worse results in both price stability and economic stability. the reason is simple. too often, the measures of the output gap that our experts can produce give the wrong signal in real time, when policymakers need to take decisions. distracting attention away from price