was replaced in the 1990s by inflation targeting. central bank independence has also been greatly strengthened over the last decade, as an institutional safeguard to facilitate more successful monetary policy by mitigating the timeinconsistency problem. it is, we can see, very natural that search for a new monetary policy paradigm takes place when economic conditions have changed or novel problems have emerged. one of the most prominent issues in the present debate on monetary policy is the question of the desirability of the current modus operandi of inflation targeting, a core element of central bank monetary policy in many countries over the last decade. one contentious question in this regard is whether the target inflation rate should be adjusted. olivier blanchard and some others, for example, have proposed moderated inflation targeting operation, while also insisting on a strengthening of macroprudential regulation by the central bank. 1 meanwhile, more radical suggestions, of replacing inflation targeting altogether with a new policy framework, have also been proposed. professor carl walsh, for example, the eminent presenter in the second session of this conference, suggests price level targeting as an alternative to inflation targeting, arguing that under price level targeting inflation expectations can act as an automatic stabilizer. 2 the crisis has also pushed to the center stage of debate central banks ’ recent unconventional monetary policy measures, in acting as lenders of last resort or marketmakers of last resort. principal questions in this regard include issues such as when the central bank should implement such measures, how effective they are, and when and how the bank should ultimately withdraw them. our debate on all of these important issues at this conference is anticipated to help us very much in developing our monetary policy frameworks further. increased demand for a greater central bank role in financial stability another salient question posed to central banks by the crisis is that of the need for expanding their role into the area of financial stability – beyond their traditional roles of ensuring price stability and, in some countries, economic growth. there is especially strong demand that the central bank do more to help prevent financial instability. this issue has attracted much public attention in korea, in fact, as adding financial stability to our bank ’ s explicit objectives, in addition to price stability, has been one of the central issues related to the recent bill revising the bank of korea act, which remains pending in our national assembly. how to proceed in this regard is unclear, however. in particular, there is controversy about the policy instruments that the central bank can use to ensure financial stability

be tiering in order to gain support for such a measure? we are not the only game in town, and we should not be. let me repeat the need for structural reforms. this is necessary for sustainable growth, and would give a boost to the competitiveness of many countries in the euro area. using fiscal space is another possibility for some countries. rate cuts are part of standard monetary policy tools, so it ’ s something that you should certainly think about before you consider non - standard measures like app. but overall, we have to assess whether these instruments are needed to support the transmission channel and what kind of impact and side effects they would have. 1 / 3 bis central bankers'speeches but first, i would like to see the september data and whether additional measures are needed to maintain price stability in the medium term. i would also like to assess what kind of impact these measures could have. let us not forget that we already have a very accommodative monetary policy. lending to households and firms is still high, according to the july figures ; investments are still ongoing in spite of the uncertainties. do you have a view on how low into negative territory the ecb can go? we need more analysis on what kind of impact and costs and benefits rate cuts would have. we need to look at potential side effects, for instance when would bank customers start to keep cash at home? and you asked about tiering. well, for this we need more analysis too. what is the net burden on banks and are mitigating measures necessary? the banks always bring up the gross burden, but they also benefit from the negative interest rate. so we have to consider all aspects before taking a decision. would you support more closely linking the state - dependent leg of forward guidance to inflation expectations? to plot a more explicit rate path should certain inflation conditions be met at a given point in time. i ’ m sceptical to link forward guidance solely to inflation expectations. could you envisage circumstances in which existing tltros could be repriced, in order to make them more attractive to banks? that might be, yes. we can use different tools : a change in forward guidance, tltro, rate cuts, the mitigating measures for rate cuts, depending on whether the data shows a need for them, their impact, costs and benefits. but overall, i don ’ t see the need for a huge package. recent ecb communications have consistently stressed that