italy and the others? before the crisis there were marked differences in wage costs and competitiveness, in greece in particular. these persistent differences have created serious tensions within the euro area. macroeconomic imbalance adjustments are not made via the exchange rate in the monetary union. that ’ s why it ’ s essential that the labour market and the goods and services markets work well. the bank for international settlements is worried about risks caused by monetary policies that are too accommodative. what ’ s your reply to that? our main objective is to ensure price stability. the financial crisis has created deflationary risks. our monetary policy measures have played a key role in the economic recovery, which is necessary for inflation to gradually return to levels in line with our objective. the question is knowing whether the central bank has gone too far in its monetary policy easing. now that the gap between growth potential and real activity is narrowing, have we accomplished our mission? at this stage, my reply is no. the economic expansion that is under way is not yet feeding through into higher inflation. we are not changing our priorities, but we must take into account the improvement in economic conditions when calibrating our measures. should an end date for qe be announced? no new decision has been taken since the governing council meeting on 7 september. we had concluded that a very accommodative monetary policy stance would remain essential to our mission and that we would decide in the autumn on the calibration of our purchase programme for the period beyond the end of the year. 2 / 2 bis central bankers'speeches

quite the contrary : some indicators suggest the reverse. i know that i am not addressing all possible criticism with these points, but i hope that those listening to me will begin to ponder whether some of that criticism has perhaps been somewhat unbalanced. some criticism of monetary policy is more pertinent, however, and i would like to address three points. it has been asked why the monetary policy committee raised interest rates when the bank has forecast that inflation will subside markedly next year. does that forecast make the rate hike unnecessary? there are two answers to this. first, the rate hike is a part of the forecast, and if it is not implemented, the forecasted inflation path will no longer be the most likely one. bis central bankers ’ speeches second, the inflation outlook is uncertain and, in light of current inflation expectations, it would be imprudent not to take action. it has also been asked whether there is a transmission mechanism in place at present. do higher interest rates reduce inflation? it is a bit paradoxical to say that interest rates have little impact and then make a terrific fuss about them. be that as it may, the transmission mechanism is certainly damaged at the moment, and it was somewhat damaged before the crash as well. but there is a transmission mechanism in place. the weight of non - indexed, variable - rate loans has increased. low deposit rates have fostered a shift towards investment in real estate in the recent term, and some have expedited purchases of consumer durables. finally, there is some impact on the exchange rate in spite of the capital controls, both because of decisions by owners of offshore kronur on whether they expatriate their interest and because domestic residentsare subject to a repatriation requirement but not a conversion requirement. it has been asked why we are raising interest rates when there is no economic overheating and investment is at a minimum. it is true that the economy is not overheated, so rate hikes do not have the intention of affecting that. but interest rates do affect inflation even though the current situation does not entail overheating. these effects come through a stronger currency and lower wage drift. furthermore, it is very common that central banks begin to shift towards a neutral monetary stance by raising nominal interest rates before the slack has disappeared so as to avoid sharper increases later at the tipping point between slack and excess demand. examples of this are the european central bank ’ s rate hike earlier this year