. dollars, there were spillover effects to other countries. to contain inflation in the u. s., which, reflecting the expansionary fiscal policy, rose earlier than elsewhere, the fed has aggressively raised its policy rate, thus contributing to depreciations of other currencies, including the euro, against the dollar, adding to global inflationary pressures. to sum up, the ecb has been facing what the ancient greeks called the hydra multiheaded monster. by this i mean that the causes of the present situation are complex, reflecting the multiple supply - side inflationary shocks hitting the economy. unsurprisingly, the combination of these shocks posed considerable challenges for central banks. first, monetary policy needed to prevent inflation from becoming entrenched by ensuring that the price effects of the shocks were not passed on to inflation expectations and wage increases. second, there is the essential fact that the euro area inflation has not been caused by demand dynamics as in the u. s., but by a series of supply - side shocks, which monetary policy is not well - suited to deal with. third, monetary policy needed to be conducted in such a way that it did not reinforce the powerful recessionary impact of these supply - side shocks. fourth, it had to operate in an environment dominated by geopolitical developments, which have caused unprecedented uncertainty and weakened sentiment. fifth, there was also a need to avoid triggering financial instability : financial markets are prone to react violently in an environment of heightened uncertainty - as the recent events in the uk have reminded us. sixth, the transmission of monetary policy had to be safeguarded and any fragmentation - related developments needed to be avoided. let us not forget what fragmentation did to our economies less than a decade ago. seventh, our credibility had to be maintained. monetary policy ought to neither overperform, nor underperform. in dealing with these challenges, history provides some, albeit not full, guidance. similar to the present situation, the global economy in the 1970s and early 1980s was hit by a supply - side shock in the form of high oil prices. 2 / 7 bis - central bankers'speeches this period was marked by double - digit inflation rates, low or negative output growth, and elevated unemployment. i believe that a contrast between that period and now will shed light on how a central bank can meet the challenges of high inflation. what i will now argue is that the effectiveness of monetary policy was more constrained in the 1970s than it is

njuguna ndung ’ u : anti - money laundering and combating the financing of terrorism in kenya remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the anti - money laundering ( aml ) national stakeholders forum, kenya school of monetary studies, nairobi, 4 october 2012. * * * hon. oburu odinga, assistant minister for finance ; chief executives of commercial banks ; mr. john wanyela, chairman, anti - money laundering advisory board ; eminent ambassadors ; our development partners ; distinguished guests ; ladies and gentlemen : i feel honoured and privileged to be with you at the start of this important interactive forum that brings together financial sector stakeholders to deliberate on the important subject of anti - money laundering and combating of financing of terrorism ( aml / cft ) with an aim of creating awareness on aml issues. today i have a humble undertaking, namely of inviting our chief guest ; the hon. assistant minister for finance to deliver the keynote address and officially open the forum. but before i invite him to the podium, i wish to make a few remarks to bring delegates to speed on the status of kenya on aml / cft issues. ladies and gentlemen ; let me begin by extending a very warm welcome to all our participants to the kenya school of monetary studies. the school is working together with the financial reporting centre ( frc ) with the support of the danish government to create an extensive aml / cft programme for the next two years to raise awareness as well as train reporting entities, law enforcement authorities and personnel in the frc on anti - money laundering initiatives. as such, today ’ s forum marks the start of the danish funded project which will run over the next 24 months. the project includes activities whose objectives are to raise awareness amongst key stakeholders engaged in the fight against money laundering and terrorism financing. as you are all well aware, kenya has made significant strides in protecting the integrity of its financial sector from illicit financial crimes. the government has not only shown a high level of political commitment in overseeing the stability of the country ’ s financial sector but has also been actively engaged in overseeing the implementation of requisite laws and measures to ensure that our financial systems are adequately protected against the financial crimes of money laundering and the financing of terrorism ( aml / cft ). at the beirut review meeting last month, we argued that kenya is caught up in a triple problem of implementing a new constitution and formulating accompanying