given macroprudential tools should allow us to deal better with lending expansions and contractions in order to protect the economy from financial excesses. in the wake of the financial crisis, the arsenal of macroprudential tools has expanded significantly. apart from the countercyclical capital buffer we have the systemic risk buffer, the buffers for globally and domestically systemic banks, the possibility to limit large exposures, increase capital or revise risk - weighted assets to residential and commercial real estate exposures. this is a significant improvement that will allow us to develop macroprudential policies that interact with microprudential ones as well as with monetary policy. but it is not enough to create macroprudential tools. they must be properly allocated institutionally in order to avoid inaction bias by policy - makers and counteract misalignment of incentives with the financial sector, in particular at certain points in the lending / financial cycle where taming is needed. in a sense, the dilemmas and incentives that policy - makers will face regarding macroprudential policy decisions will not be far different from those encountered in the past when setting monetary policy ( i. e. interest rates ). for the latter, the optimal institutional design is to enshrine monetary policy in an independent central bank. for the former, a very similar solution, intuitively, should prevail, although the theoretical framework and the empirical research to support it is much less advanced than in the monetary field. needless to say, macroprudential policy is particularly relevant for a country like spain, part of a monetary and banking union where, as seen in the past, the financial and business cycles of the member countries may be in different positions. with a common monetary policy and ( micro ) supervisory policies, and a fiscal policy with almost no room for manoeuvre, the macroprudential policy becomes a much - needed ‘ degree of freedom ’ to deal with the lending cycle, a task that traditionally has been allocated to central banks too. as the recent article iv visit of the imf made clear, spain is one of the few countries in europe still not to have a macroprudential authority. given the role that macroprudential policy will play in the future, it is probably high time that we all reflect on the optimal design of this authority in order to enhance financial stability. see j. saurina and c. trucharte : “ the countercyclical

, the economy ’ s natural rate of interest, cannot be observed in reality, but only, in the best of cases, estimated indirectly. accordingly, the central bank needs to analyse a broad range of indicators in order to infer the state of the economy, so as to be able to determine the appropriate monetary policy stance. this conceptual framework worked satisfactorily during the 1990s and the early years of the current century, a period known as the “ great moderation ”, characterised by stable growth in the advanced economies and relatively low levels of inflation. however, the economic and financial crisis that began in 2007 - 2008 forced central banks to adopt innovative policies and, on occasion, to navigate “ uncharted waters ”. this is the subject i wish to talk about in the final part of my speech. the monetary policy challenges arising from the crisis the magnitude of the crisis that began in 2007 - 2008 led the central banks of the main developed economies to design and implement expansionary monetary policies of unprecedented magnitude and scope. the crisis had a significant effect on banks and other financial intermediaries, leading to a contraction in credit and, therefore, in economic activity. this led the main central banks to introduce various measures to provide liquidity to their banking systems at times of market malfunctioning. in addition, asset purchase and medium and long - term financing programmes were launched that avoided a systemic crisis which would have led to the failure of a large number of banks and, undoubtedly, to an enormous crisis in the real economy, as during the “ great depression ” in the 1930s. even so, the severity of the recession led to a very sharp contraction in demand, and ultimately to inflation rates that were too low and incompatible with the mandate of the central banks of the main advanced economies. this situation forced them to reduce the interest rates determined by monetary authorities to historic lows. some central banks, such as the ecb and those of japan, sweden, denmark and switzerland, reduced rates to negative levels. 5 / 7 in fact, one of the factors that has influenced the actions of central banks most in recent years has been the difficulty of reducing interest rates when they are already at very low levels. interest rates that are too low may mean that there is no incentive for financial intermediation, since, for example, it is more profitable to store money in cash than to deposit it in the banking system. what should we do then when rates are very low and the economy still requires