the monetary policy strategy of both the fed and the ecb are untested and could add uncertainty. 5. several emerging markets are already facing upward inflation pressures, at a time when output remains below potential. thus, the inflation gap is positive, the output gap remains negative, and financial markets are prone to volatility episodes. 6. although the shocks that have affected inflation are expected to be of a transitory nature, given their variety, magnitude, and the extended time frame in which they have been affecting inflation, they may pose a risk to the price formation process. • monetary authorities are likely to continue to face difficult tradeoffs. • regarding monetary policy instruments, asset purchase programs are not “ over - the - counter ” in emerging markets ; policy makers need to be mindful that central bank financing to governments can fall into a situation of fiscal dominance. • stress tests of fiscal sustainability and availability of sources of finance are needed to avoid situations that could lead to financial repression or monetization of fiscal deficits. unfortunately, latin america had many of these painful episodes that caused incommensurable long - lasting damage. • also, if asset - purchase programs in emerging markets are perceived as central bank financing of governments, it would exert pressure on risk premia, the exchange rate and capital outflows, contrary to the original objective of easing financial conditions. • thus, it is necessary to act prudently and follow a robust policy approach, contributing to solid macroeconomic fundamentals and to an orderly adjustment of markets and relative prices. challenges for financial stability • regarding financial stability, the covid - 19 shock has allowed us to test the internationally agreed regulatory reforms developed as a response to the great financial crisis of 2008 - 09. • the regulatory framework was enhanced to attain more resilient financial institutions, and capital and liquidity requirements were strengthened. • even though the current crisis is not over, the regulatory reforms seem to have worked. • technological innovation represents both a challenge and an opportunity for the financial system. • we need to make the best use of technology for the benefit of our societies. this is particularly important for emerging markets, given that the opportunity to attain more inclusive and deeper financial systems is greater than in advanced economies. • we also need to avoid the growth of an unrestrained shadow techbanking system, prone to regulatory arbitrage. we must ensure that the same risks are treated in the same way regardless of the provider of the service. • opening

broad a group of nations, numbering well over 100. it is important that emerging and newly industrialized economies making good progress toward preparedness, and there are many, disclose that as clearly as possible. market participants should look for and make those disclosures part of their decisionmaking. those “ emerging market economies ” that are not making satisfactory progress should disclose their status and seek assistance as they work to remediate mission - critical systems and engage in contingency planning. in particular, financial institution preparedness can be hampered by a lack of preparedness in critical infrastructure – telecommunications, power, and water. this cannot be taken for granted. i would, however, note that many of the countries that may be the farthest behind are also those that are least dependent upon technology. similarly, many of these countries have the fewest links to the international financial markets, and their performance during the century date change is least likely to have a significant cross - border impact. finally, good contingency planning, including manual work - arounds may avoid serious problems. ultimately, however, systems will have to be fixed or replaced, whether before the century date change or after, and the sooner the process is started, the better. conclusion to sum up, i believe that the us banking system is largely ready for the year 2000 and that major foreign financial institutions generally are working diligently to be ready as well by 1 january. thus, i believe that the year 2000 in the financial sector of the united states and many other countries is really less of a technical issue now than it was last year at this time. moreover, the relevant regulators here and around the world know what needs to be done over the next five months, and are communicating with the business leaders managing the world ’ s financial institutions. the progress we see in the global financial sector and the evidence from successful cross - border and domestic tests are also positive signs. thus, with the technical and business elements generally making good progress, the real issue remaining for the united states and other leading countries is that of public awareness, understanding and, ultimately, public confidence. we should all recognize that the year 2000 event is unique in that we all know that it will occur, but exactly what will occur is uncertain. in this environment, we should listen to the most reasonable and responsible sources. part of maintaining public confidence is fact - based disclosure both to the public at large and to market counterparties. disclosure still remains an issue for some, particularly as “