##ous shocks. financial conditions then affect policy rates only to the extent that they have an impact on the forecast of inflation and resource utilization. 4 now, is there any reason to modify this view of monetary policy given the experience of the financial crisis so far? let me approach this question by first asking what the causes of the financial crisis were, whether monetary policy contributed to the crisis, and whether a different monetary policy was warranted and could have prevented or reduced the size of the crisis. the financial crisis was not caused by monetary policy many have claimed that excessively easy monetary policy by the federal reserve after 2001 helped cause a bubble in house prices in the u. s., a bubble whose inevitable bursting proved to be a major source of the financial crisis. 5 however, as i see it, the crisis was mainly caused by factors that had very little to do with monetary policy and were mostly due to background macro conditions, distorted incentives in financial markets, regulatory and supervisory failures ( also when central banks have been responsible for regulation and supervision ), information problems and some specific circumstances, including the u. s. housing policy to support home ownership for low - income households. 6 the macro conditions preceding the crisis included low world real interest rates associated with global imbalances, as well as the great moderation, with a long period of very stable growth and stable low inflation, which led to a systematic underestimation of risk and very low risk premia in financial markets. there were distorted incentives for commercial and investment banks to increase leverage that were made possible by lax regulation and supervision and the lack of an appropriate bank resolution regime. there were also distorted the idea that inflation targeting implies that the inflation forecast can be seen as an intermediate target was introduced in king ( 1994 ). the term “ inflation - forecast targeting ” was introduced in svensson ( 1997 ), and the term “ forecast targeting ” in svensson ( 2005 ). see woodford ( 2007a, b ) for more discussion and analysis of forecast targeting. several central banks that do not call themselves inflation targeters effectively do conduct flexible inflation targeting, although they may not be quite as transparent about their inflation target, the role of stability of the real economy, etc. see, for instance, taylor ( 2007 ). see bean ( 2009 ) for an extensive and excellent discussion of the crisis, including the credit expansion and housing boom, the macroeconomic antecedents, the distorted incentives, the information problems, the amplification and propagation

nbu is pursuing the policy of steering inflation to a point target of 5 % within an extended policy horizon of up to three years. inflation targeting reduces uncertainty, while flexibility allows us to take current economic conditions into account – including structural shocks caused by the war. flexible inflation targeting has its own distinct features. 2 / 4 bis - central bankers'speeches first, we focus on long - term goals. even in crisis conditions, we adhere to inflation benchmarks, paving the way for a gradual return to full - fledged inflation targeting. second, our monetary policy reacts to the conditions of the day : we have a broader monetary policy horizon under the transitional regime, which allows us to quickly adapt and respond to new shocks, such as energy crises or supply chain disruptions. third, flexible inflation targeting involves the use of a combination of instruments. apart from interest rate policy, we maintain an active presence in the fx market and impose caps on capital movements. as favorable prerequisites emerge, however, we continue our movement towards more market - based mechanisms. we will give special attention today to this third feature, as the use of a combination of policy instruments is not unique to ukraine and is increasingly seen in other small open economies. in fact, the main task of this workshop is to find an effective balance between the instruments used – in particular those based on advanced macroeconomic analysis. the fourth important feature of a flexible monetary regime is a high level of interaction between the fiscal and monetary authorities. the nbu cooperates closely with the government in raising external financing and implementing reforms in ukraine. at the same time, this cooperation implies that authorities must respect each other's mandates. which brings us to the fifth feature : the nbu strives for transparent, active communications with every target audience. we freely explain our decisions to avoid misleading market participants, experts, government officials, investors, and the public. we do this to maintain their trust – the primary anchor for an effective policy. through this approach, ukraine has been able to retain macrofinancial stability while setting the stage for economic recovery, despite continuing to face massive challenges. in addition to internal transformation, an important component of resilience is close cooperation with international partners. for ukraine, cooperation is now an integral element of macrofinancial stability. and at this point i'd like to reiterate our gratitude to our partners for the expert, financial, military, and humanitarian assistance they have provided. today we are one thousand and fifteen