bostjan vasle : address - governing council meeting address by mr bostjan vasle, governor of bank of slovenia, at the final dinner as part of governing council meeting, ljubljana, 17 october 2024. * * * dear colleagues, dear friends, good evening and welcome to the concluding dinner of our monetary policy meeting in slovenia. the most important part is done. in the morning, we decided on our policy move, christine communicated it a few hours ago and the response was positive. organizing the second meeting – the ecb governing council first gathered in slovenia 12 years ago – is an opportunity to reflect on the changes that have taken place since then. besides different macroeconomic landscape, another notable change is the remarkable progress in digitalization, and how it has affected our operations. let me start where we left off a few hours ago – with our press conference. this year marks a decade of their livestreaming. replacing selective access to press conferences with real - time worldwide access has greatly broadened our reach and enhanced our transparency. markets now react immediately to our announcements and comments. by analyzing market developments during and shortly after a press conference, we can measure investors'interpretation of our policy decisions. furthermore, digitalization improves accessibility of data and speeds up its processing. the challenge now is on the other side : how to absorb such vast amount of information in various forms. this is a question where artificial intelligence proves increasingly beneficial. yet, the integration of ai across various economic sectors and its overall impact on the economy and prices add another layer of uncertainty to future developments. especially important from the financial stability point of view is the speed at which information spreads via internet and social media. this can lead to rapid reactions by consumers and market participants. algorithmic trading, along with generative ai, also introduces certain financial stability concerns. while the digital transformation brings significant benefits, it makes financial and other institutions more exposed to the fragility of technological infrastructure, as seen during latest events this year, and more vulnerable to fraud and cyber - attacks. this calls for a robust approach for monitoring and managing associated risks. with this year's cyber stress tests and related supervisory activities, we have taken important steps in this direction. finally, digital progress have and will continue to transform the landscape in which monetary policy operates and may affect its transmission. dear colleagues, digitization presents both opportunities and challenges, which we can best address by openly exchanging knowledge, tools, and experiences. each of us has some unique

you can get more at the same price. what is the problem ( chart 2 )? decline in aggregate demand due to deferred spending at the outset, we need to acknowledge the difference between prices in general and those of individual goods and services. as for the former, there are indicators such as the cpi and the domestic corporate goods price index. price stability that the bank aims at is defined by the cpi. the cpi shows changes in the total amount of expenditure required to purchase the equivalent goods and services purchased by households at a given time, which is called the “ reference period ”. the cpi is calculated by giving a value of 100 for the reference period and comparing prices of the observation period with those of the reference period. inflation is defined as a situation bis central bankers ’ speeches in which the cpi persistently rises ; on the contrary, deflation is defined as a situation in which the cpi keeps falling. a price rise or fall of individual items such as vegetables and television sets does not constitute either inflation or deflation. keeping that in mind, let me now explain what the consequence of a persistent decline in general prices – rather than price declines in individual goods and services – will look like. to be sure, a decline in prices itself will have the effect of raising your real income. however, a persistent decline in prices means that the more you wait, the more goods and services you can get at the same price. in other words, it means that the value of cash and deposits increases just by holding them. thus, firms and households will hoard money as much as possible and defer actions that are associated with spending, such as consumption and investment. put in the jargon of economics, aggregate demand will decline. that is a problem. if aggregate demand declines and sales of goods and services decrease, firms will reduce production to a level consistent with the decline in sales. as corporate profits will decline and employee income will fall accordingly, people ’ s consumption and housing investment – as well as firms ’ business fixed investment – will further stagnate. namely, aggregate demand will further decline, and that will induce a further decline in price levels. thus, the economy will be trapped in a vicious cycle of price declines and recession ( chart 3 ). increase in effective debt burden in addition, as a decline in prices means that the value of money for goods and services will increase, for those who borrow money, the value of money that they will have to repay in the future will increase