##tegration persisted, it would be likely to trigger more protracted inflationary pressure. furthermore, a fragmentation of the global economy would probably lead to more frequent bottleneck situations, since changes in demand would once again increasingly affect domestic economies and it would be less possible for these changes to be absorbed by the global economy. as a result, inflation and the economy would also become more volatile again. all of this means that monetary policy would have to be focused on tackling inflation more frequently and intensively than in recent years. moreover, the use of monetary policy instruments could also be affected. would the traditional instrument of interest rates be used again more often, or would unconventional measures continue to play an important role in countering the impact of adverse disruptions? this primarily depends on whether the neutral interest rate remains low or returns to a higher level. both of these developments are conceivable. the neutral level of interest rates could rise and the traditional interest rate policy could return to the fore if there were to be a reduction in the investment of savings from the emerging economies in the advanced economies. the neutral level of interest rates would also rise if defence spending and investment in energy infrastructure were to increase government debt or if inflation were to remain high. on the other hand, however, the neutral level of interest rates could also persist at the low level of the past 15 years if there were to be an increase in saving due to the geopolitical uncertainty or if inflation were to decline again. central banks will have to be vigilant here in order to discern the effects of these various forces in good time and contextualise them correctly. ultimately, another aspect that must not be forgotten is the political pressure that increasing government debt, for example, could entail. political opposition to monetary policy tightening is likely to mount if the level of government debt is high. if central banks are to continue to be able to ensure price stability in this situation, their independence must remain safeguarded. closing remarks ladies and gentlemen, i come to my concluding remarks. today ’ s geopolitical situation would have seemed unthinkable at last year ’ s general meeting. the long - term consequences of the war 4 / 5 bis central bankers'speeches in ukraine for the structure of the global economy and thus also for monetary policy are still difficult to assess at present. that said, one thing already seems clear : the challenges for monetary policy remain manifold. we will have to work intensively on dealing with them to ensure

cat and not, by itself, of such enormous importance to justify devoting monetary policy solely to its control. just about the whole of the world ( whether inflation targeters or not ) has reduced inflation to manageable levels. it seems at least possible that people will begin to regard this task as so easy, and so assured of success, that monetary policy could be asked to do more. i can think of two directions in which we might be asked to do more. first, we have established a wide consensus that monetary policy can do something to smooth the course of the business cycle, but this should not be the primary goal. but if inflation control begins to look easy, people may ask central banks to focus the power of monetary policy more fully in the direction of smoothing the cycle. i do not propose to say more about this, other than to observe that this can, at least in principle, be encompassed within the inflation targeting framework, recognising the legitimate trade - off between inflation variability and output variability. but we also need to remember how much more painful it is to have to wind inflation back down, once price expectations have been disturbed. more interesting, in the current debate, is whether monetary policy should do more to achieve financial stability. a clear dichotomy or specialisation has developed, in which monetary policy is seen as the instrument for maintaining price stability, and prudential regulation is ” assigned to ” financial stability. this dichotomy is increasingly reflected in the vogue of separating the central bank from the prudential regulator. but financial stability is under constant bombardment – reflected in the increasing complexity of the basel ii rules ; the pressure to widen the reach of financial regulation ; the increasing recognition that financial stability problems are coming not just from institutions, but from markets and their evolution ; and the difficulty of staying ahead of the evolution of ever - more - complex financial instruments and products ( driven by competition and sometimes by the objective of getting around prudential regulations ). the ltcm experience is a reminder of how the leading - edge players will be constantly pushing beyond the regulators ’ capacity to understand, let alone react effectively. on top of this we see the evolution of markets, often driven by the desire to minimise risk to individuals, taking actions which may make the overall system more vulnerable – the examples here are the various forms of “ inflation targets and inflation targeting “, remarks by governor laurence h meyer at the university of california at san diego economics roundtable, san