) r = vault cash ( vc ) + bank balances with the central bank ( bdcb ) again to forecast the components total bank reserves ( r ) efficiently, there is need to understand the intricacies of monetary survey sufficiently well, understand the financial environment, know the stance of current monetary policy and the short - term outlook of financial developments. • data constraints the data used in forecasting the monetary aggregates are too often not firm, or where firm, data are characterized by breaks in series. such data include those of real gross domestic product ( gdp ), inflation, revenue, expenditure, float items etc. these data series r sometimes are constructed using different base years, making comparisons of series even of the same variable problematic. besides weak data series, there is also the problem of coping with lags in monetary data. the computation of the estimated supply of total reserves ( osr ), on the day of omo market often involves several days lag. this means that to be able to obtain osr, where “ t ” is the omo market day, the compiler must be able to project both the sources and uses of monetary base, several days prior to the omo market day say osr. the techniques for doing this are yet to be fully developed in all t - 3 waifem constituent countries. • determination of public sector borrowing requirement the primary target for omo is the difference between the estimated supply and demand for money under equilibrium conditions. but in arriving at the ultimate target for omo, the excess supply needs to be adjusted to accommodate public sector borrowing requirement in the period. thus there would be need to make the problematic forecasts of government cash revenue and expenditure, including float items. in this regard some of our member countries, notably ghana have taken considerable strides through the application of some appropriate software. • capacity for econometric forecasting familiarity with the use of econometric techniques is a sine qua non for liquidity forecasting. too often, waifem has had to run courses in econometric modeling and forecasting in order to bridge these gaps and it has resorted to improved monetary and fiscal policy formulation in the sub - region. ladies and gentlemen, lessons in capacity building needs i have not made any pretensions to proffering exhaustive analysis of the problems of liquidity forecasting. i believe the expert faculty at your disposal will do just that. however, from the presentation thus far, it is clear that

. this was driven in large part by the uptick in us nominal interest rates, which spilled over into the euro area on account of the international linkages between interest rates. a model analysis by the bundesbank found that this was the case, identifying that the key factor driving the upswing in bund yields was an improvement in the economic outlook in the united states. however, macroeconomic prospects brightened in the euro area, too, and this likewise helped drive up bund yields. what is more, market - based inﬂation expectations in the euro area have moved from their lowest point in march of last year towards our target of below, but close to, 2 %. this is why i consider it important to view interest rate changes in real terms, too – that is, after stripping out inﬂation expectations. market - based inﬂation expectations ( 5y5y forward inﬂation rates ) were recently at just over 1. 5 % and thus actually higher than before the coronavirus crisis. note that these inﬂation expectations are likely to still be skewed to the downside, [ 4 ] seeing as the bond prices from which they are derived may also include liquidity and risk premia. besides inﬂation expectations, what these reﬂect are investor preferences for certain forms of investment. on the whole, funding costs for the non - ﬁnancial sector in the euro area are still at historically low levels. bear in mind, though, that the measures based directly on ﬁnancing terms for enterprises and households only become available with something of a time lag, at which point they may not fully reﬂect any potential permanent change in the markets. this is why the governing council of the ecb also looked ahead in its latest decision : it saw the risk of the rise in risk - free interest rates and government bond yields in the year to date spilling over into other areas. after all, banks use these interest rates as benchmarks when setting their lending rates. a signiﬁcant and sustained increase in market rates would potentially lead to a premature tightening of ﬁnancing terms. this could put a strain on the economic recovery and set us back as we head towards price stability. that is why the pepp purchases during the second quarter will now be conducted in a way that makes them much more extensive than in the ﬁrst few months of this year. the ecb governing council is thus using the ﬂexibility that the pepp