29. 11. 18 opening remarks 2nd annual meeting cebra international finance and macroeconomic program pablo hernandez de cos governor ladies and gentlemen, it is a great pleasure for me to welcome you all to the second annual meeting of the cebra ( central bank research association ) international finance and macroeconomics program, hosted by the banco de espana. let me first thank our colleagues from cebra for their efforts in co - organising this conference. cebra is an association that seeks to encourage applied and theoretical research on relevant topics for central banks, among other institutions. its research programmes foster interaction among researchers at central banks and in academia. in this vein, the international finance and macroeconomics program ( ifm ) led by galina hale provides an excellent forum to discuss key policy questions that are also relevant to academia. the title of this conference is : “ risk, volatility and central bank policies ”. allow me to briefly share with you – from a central banker ’ s perspective – some of our current concerns in relation to the three items highlighted in this title. starting with risks, in recent months some institutions – including the banco de espana through its financial stability report – have stressed that, although the financial stability environment remains favourable, global near - term risks have increased or have begun to materialise. in recent years the global economy has experienced a period of sustained and across - theboard growth, supported by unprecedented expansionary and unconventional monetary policies around the world. but this context has also been conducive to the accumulation of certain financial vulnerabilities. in particular, it has led to a “ search for yield ” by investors who have been seeking more profitable and riskier investments. this is evidenced at least by three facts : increasing leverage, the high share of debt at risk and the relatively high valuations of certain assets. now the current phase of ultra - loose monetary policy is coming to an end. in the us, after seven years of interest rates around the zero lower bound, monetary policy is being normalised. other advanced economies, such as the uk or canada, have also started to raise interest rates. regarding the euro area, the ecb governing council anticipates that, subject to incoming data confirming the medium - term inflation outlook, net asset purchases will come to an end in december 2018. in this context, two main developments in international financial markets warrant attention as, in my view, they might currently pose key threats to financial stability and global growth. first

, and the government ’ s new economic stimulus package are expected to underpin the economy. however, attention should be paid to growing risks of downward pressures on the economy induced by a possible further slowdown in overseas economies as well as by developments in foreign and domestic capital markets. with regard to prices, import prices are rising, mainly reflecting the depreciation of the yen. domestic wholesale prices are declining somewhat mainly due to the decrease in prices of electrical machinery. consumer prices continue to be somewhat weak owing to the decline in prices of other imported products and their substitutes, despite the increase in prices of petroleum products. corporate service prices are still falling slowly. this report was written based on data and information available at the time of the bank of japan monetary policy meeting held on february 9, 2001. the bank ’ s view of recent economic and financial developments, determined by the policy board at the monetary policy meeting held on february 9 as the basis for monetary policy decisions. as for the conditions surrounding price developments, the recent yen depreciation is exerting upward pressures on prices. moreover, the balance between supply and demand in the domestic market is projected to be on a gradual improving trend, while an economic recovery is expected to continue at a moderate pace. recently, however, the pace of recovery seems to be slowing and crude oil prices, which had been exerting upward pressures on prices, are falling. in addition to the declining trend of machinery prices due to technological innovations, the decrease in prices of consumer goods arising from the streamlining of distribution channels, and the reduction in communications fees aided by deregulation will continue to exert downward pressures on prices. overall, prices are expected to be somewhat weak for the time being. in the financial market, the overnight call rate is generally moving around 0. 25 percent. interest rates on term instruments have been declining somewhat. the japan premium remains negligible. yields on long - term government bonds have declined to around 1. 4 - 1. 45 percent. the yield spreads between private bonds ( bank debentures and corporate bonds ) and government bonds are mostly unchanged or expanding somewhat. stock prices continue to be weak and are moving around the lowest level recorded since the beginning of 2000. in the foreign exchange market, the sharp depreciation of the yen since late december has come to a pause. the yen is currently being traded in the range of 114 - 117 yen to the u. s. dollar. with regard to corporate finance, private banks