numerical threshold level of 6. 5 %. explicit conditionality is introduced by quantitative and qualitative criteria. specifically, it is stressed that interest rates could be increased once inflation is expected to be above 2. 5 % or inflation expectations no longer remain well anchored. in june 2013, the fed also provided date - based guidance about the tapering of its asset purchase program, revealing its intention to cease new purchases of treasury bonds and mortgage - backed securities by mid - 2014. the bank of england ’ s forward guidance in august 2013 was on both interest rates and asset purchases at the same time. akin to the fed, the bank of england provides thresholdbased guidance with a numerical target for the unemployment rate. both the announced interest rate and asset purchases policies are subject to the same ( quantitative and qualitative ) knockout criteria, which include risks to price stability and financial stability. the ecb, in turn, has provided qualitative open - ended guidance, not referring to any explicit threshold or date that will likely lead to the termination of the accommodative policy stance. the conditionality of the ecb guidance is not linked to a numerical threshold for inflation, but more broadly to changes in the outlook for price stability. both quantitative and qualitative guidance have their relative merits, and both face challenges. first, forward guidance must be clearly understood by the public to be effective. to this end it must neither provide too much information, which may confuse market participants about the central bank ’ s policy intentions, nor provide too little information, which may increase the risk of misunderstandings. finding the right balance is particularly difficult for policymakers at the center of the public debate, be it in the united states, in europe, or elsewhere. their exact choice of wordings typically gives rise to extended debates in the financial media, which often involves serious misinterpretations. a recurrent example is that simple statements about positive economic developments are misinterpreted as indications of imminent increases in the interest rate. second, forward guidance must be credible. on the one hand, this requires that market participants have confidence in the central bank ’ s assessment of future economic conditions, that is, economic forecasts must continue to be of the highest quality. on the other hand, policy intentions must be time - consistent. this is guaranteed in the current practices by the conditional nature of forward guidance announcements, giving central banks the necessary room to react to unanticipated market and economic

ardian fullani : competition versus risk - taking in the banking sector in see countries speech by mr ardian fullani, governor of the bank of albania, at the conference on “ competition versus risk - taking in the banking sector in see countries ”, organized by the central bank of the republic of kosovo, prishtina, 5 october 2012. * * * honourable governors, dear participants, regular regional meetings are a good opportunity to discuss economic and financial developments in our countries. they help identify the similarities and differences among us, and the economic and financial policies we need for solving the problems we encounter. the geographic position and economic relations with the same trade partners are factors that have led to similar economic and financial developments across our countries. they have determined the nature and size of contamination from the global economic crisis, in general, and the euro area crisis, in particular. the impact of the crisis on our countries has often been the main topic of discussion in such meetings. macro - financial difficulties and uncertainties in the euro area render the actual european crisis the main focus of this meeting as well. actual operations and commitments of the european central bank consist in a wide range of instruments that european authorities may use to support financial markets and institutions. investors, however, are still waiting on additional decisions which will be more harmonised and stronger politically. the economic situation, especially in greece and spain, remains difficult, whereas portugal and italy have undertaken additional fiscal consolidation programmes. unemployment in the eu and the euro area has reached historic levels, especially amongst the youth. economic growth is weak and is mainly concentrated in central countries of the euro area. our countries have been affected by this situation for objective reasons. trade relations, movement of capital and workers, and the financial system are channels that pass these problems on to our economies. the form, size and extent of this impact have evolved over the past four years. at present, the situation is reflected in the decrease of domestic demand, decline of economic growth, reduction of available income, loss of confidence and deterioration of optimism ; this is, in turn, reflected in higher savings. consequently, these developments have placed the focus of economic policies towards economic activity and revitalisation of optimism in order to boost investments and consumption. on the other hand, maintaining financial stability becomes a necessity, creating thus a binomial of priorities that condition each other and require a simultaneous solution. the albanian economy is increasingly facing the challenge of economic growth. although the albanian economy enjoys consolidated macroeconomic stability