market downturns in both dimensions. the swift increase in interest rates since 2022 has been a regime shift for financial and non - financial actors alike. the pass - through of higher interest rates to the economy has undoubtedly had an impact on the real estate market and on financial stability. but the magnitude and speed of its impact differed across countries depending on a range of 1 / 3 bis - central bankers'speeches factors, including the structural features of housing financing, such as the importance of fixed vs variable rates or mortgage duration. another important factor has been the level of debt of non - financial actors. this new environment has raised several questions for the conduct of macroprudential policy. as monetary policy has been restrictive on purpose to preserve price stability, should macroprudential tools be relaxed in the face of the real estate market downturn? faced with this dilemma, the report provides us with food for thought : one of its main lessons for macroprudential policy - makers is to recommend prioritization of tools that meet objectives without adjustment. in particular, if we aim at maintaining resilience, tools which act as guardrails appear especially helpful in a context when financial stability risks have increased. on this, i look forward to hearing the views of the panelists that will discuss the structural vs cyclical use of macroprudential policy but we will also get useful insights from the panel on current financial stability challenges in housing markets and the distribution of risks. 2. how to articulate? the challenge of the interaction with other policies the second interaction challenge that i will dwell on today is the following : " how to articulate macroprudential policy for housing risks with other policies? " we have to be humble : macroprudential policy can do a lot but cannot do everything, and this is especially true when it comes to housing, which has a multifaceted nature. and we have to be clear on the purpose of macroprudential policy, which is safeguarding financial stability – no more, no less. obviously macroprudential policies are a complement to the first line of defense for financial institutions which is sound management, incentivized by demanding regulation and effective supervision. in this regard in europe we have come a long way in institutional terms : i am proud that we are celebrating today the 10th anniversary of europe's single supervisory mechanism, which has proved to be a success. more broadly, the cgfs report emphasizes that successful mitigation

trinity. and the third facet is the framework for the adjustment process. let me turn to these one by one. role of exchange rates first, on the role of exchange rates – a prime lever for redressal of external imbalances. global rebalancing will require deficit economies to save more and consume less. they need to depend for growth more on external demand which calls for a real depreciation of their currencies. the surplus economies will need to mirror these efforts – save less and spend more, and shift from external to domestic demand. they need to let their currencies appreciate. the question boils down to what can surplus countries do domestically to increase consumption and what can deficit countries do domestically to increase savings. the problem we have is that while the adjustment by deficit and surplus economies has to be symmetric, the incentives they face are asymmetric. managing currency tensions will require a shared understanding on keeping exchange rates aligned to economic fundamentals, and an agreement that currency interventions should be resorted to not as an instrument of trade policy but only to manage disruptions to macroeconomic stability. capital flows that takes me to the second facet of global imbalances – return of lumpy and volatile capital flows. since capital flows have become such an emotive topic around the world in recent months, it is important perhaps to recall a few realities. first, that emes do need capital flows to augment their investible resources, but such flows should meet two criteria : they should be stable and be roughly equal to the economy ’ s absorptive capacity. the second reality that we must remember is that capital flows are triggered by both pull and push factors. the pull factors are the promising growth prospects of emes, their declining trend rates of inflation, capital account liberalization and improved governance. the push factors are the easy monetary policies of advanced economies which create the capital that flows into the emes. what this says is that international capital flows comprise a structural component and a cyclical component. it is the cyclical component that typically disrupts the macroeconomic stability of emes. bis central bankers ’ speeches that said, the multi - speed recovery around the world and the consequent differential exit from accommodative monetary policy have triggered speculative capital flows into emes. the most high profile problem thrown up by capital flows, in excess of a country ’ s absorptive capacity, is currency appreciation which erodes export competitiveness. intervention