interest rates is discussed, attention quickly turns to central banks. amongst other reasons, this is because of the special role they have been playing in responding to the financial crisis. central banks all over the world took extraordinary measures, pushing policy rates to zero, providing excess liquidity, and purchasing assets on a large scale. in doing so, they contributed to a low interest rate environment that persists in the euro area to this day. ten years on from the peak of the financial crisis, we may have emerged from serious crisis threat, but the eurosystem ’ s monetary policy stance remains exceptionally expansionary. the anticipated end of net asset purchases marks only the beginning of the exit from the ultra - loose monetary policy. it is the first step on a path of normalisation which will last several years. what does this mean for insurers and pension funds which depend on capital markets rates? needless to say, interest rates will pick up as monetary policy gradually returns to normal. however, monetary policy does not dictate the levels of capital market rates at the end of this process. real long - term interest rates are crucially determined by saving and investment decisions made by households and enterprises. and even in an imaginary world without a financial sector, a rate of interest would emerge. indeed, beyond the recent period of low interest rates, we have witnessed a considerable decline in real yields on long - term government bonds in major advanced economies since the start of the 1980s. owing to its persistence and outreach, this decline is often attributed to secular or global forces. in particular, a recent study points to lower trend growth as a major factor, which is possibly linked to demographic changes. 7 4 / 7 bis central bankers'speeches given the decline in the actual real rate of interest, numerous studies suggest that the so - called natural rate has also decreased in recent decades – that is, the real interest rate at which the goods market is in equilibrium and prices are stable. this rate may have important implications for monetary policy. in particular, the natural rate is often seen as an important benchmark for the monetary policy stance. if the key interest rate less the expected inflation rate is below this interest rate, monetary policy is expansionary, as it provides incentives for consumers to purchase more and for enterprises to step up investment and output. therefore, the natural rate may be an important anchor for monetary policy to achieve its objective of price stability – at least from a more theoretical perspective. simply put, if monetary policy tracks

of policy. this proposition has recently again been called into question. economists at the bank for international settlements ( bis ) point out that economic developments are determined, among other things, not just by business cycles but also by financial cycles. in particular, a financial crisis can dampen the output path of an economy persistently. consequently, the bis economists write : “ to the extent that monetary policy ( … ) can influence 5 / 7 bis central bankers'speeches the financial cycle, it too may have a persistent impact on the economy ’ s long - run path, and hence also on real interest rates. ” 11 the impact of this finding extends far beyond the use of the natural interest rate as a benchmark for monetary policy. it also raises the issue of whether monetary policymakers should focus more of their attention on the financial cycle. as we have witnessed, financial crises have a considerable impact on macroeconomic outcomes and, ultimately, on central banks ’ ability to guarantee price stability. since the financial cycle is longer than the business cycle, this comes down to extending the policy horizon. jacques - yves cousteau, the pioneer of modern underwater diving, was well aware that it is often a good idea to take the longer - term view, too. speaking in 1992, he said : “ we are living in an interminable succession of absurdities imposed by the myopic logic of short - term thinking ”. 12 taking a longer - term perspective on inflation, central banks might be compelled to act on the build - up of financial imbalances, even if they pursue only the single objective of price stability. this would also help to reduce asymmetric responses by monetary policy. i am convinced that monetary policy should have a symmetrical effect over the entire economic cycle. in a downturn, policymakers must respond vigorously ; but in an upswing, when risks in the financial sector can build up, they must also be able to tighten the reins again as needed. 5 conclusion ladies and gentlemen, a golden rule for divers is : don ’ t exceed the maximum time. i ’ d say that ’ s good advice for speakers, too. so i will now bring my speech to a close. our financial system is much more stable today than it was ten years ago. a large number of weaknesses have been addressed and reforms initiated. now our task is to make sure that the rules we have created are applied consistently. the former chairman of the fed, paul volcker, recently cautioned that “