he said. with its benchmark interest rate already at 0. 05 %, the czech central bank last november pledged to maintain the koruna ’ s exchange rate at above 27 to the euro, effectively setting the firmest acceptable level for the currency. mr. singer said that the weak - koruna policy has persuaded czechs that the central bank won ’ t allow consumer prices to fall, and removed the risk of a slide into a prolonged period of deflation. central bankers aren ’ t worried so much about falling prices as about the threat that consumers and businesses will come to expect prices to continue to fall and will postpones their purchases, weakening economic growth and pushing prices down further. “ we were afraid of this problem of postponed consumption and investment, ” mr. singer said. “ but people have realized the central bank is not going to allow a deflationary slide. ” bis central bankers ’ speeches mr. singer said that retail sales are picking up, driven by higher auto sales, an indication that consumers aren ’ t postponing purchases in the expectation goods will be cheaper in the future. he cited a decline in the savings rate as another indication that the risk of deflation has been lessened. the central - bank chief said that while food prices may rise at a slower pace in response to a good harvest, he was not worried about that development because people can ’ t postpone food purchases. measured according to an eu standard, the annual rate of inflation in the czech republic picked up to 0. 7 % in august from 0. 6 % in july, and mr. singer said he is confident it will rise to the 2. 0 % midpoint of the central bank ’ s target range next year, assuming the eurozone follows a “ baseline scenario ” of a return to modest growth. the ecb has indicated it will keep its benchmark interest rate low through 2017, while the bank of england and the u. s. federal reserve are expected to raise their benchmark interest rates next year. some policymakers worry there is a risk of “ snapback ” when the process of returning to more normal monetary policy begins. mr. singer said the central bank has the power to ensure that doesn ’ t happen, and could intervene to counter an overly rapid appreciation of the koruna. “ we will not tolerate snapback, ” mr. singer said. “ our promises are credible to the markets, and obviously we are willing to prevent snapback. ” the central - bank

, no matter how carefully done, can never fully protect against systemic events. in a sufficiently severe panic, funding problems will almost certainly arise and are likely to spread in unexpected ways. only central banks see daniel m. covitz, nellie liang, and gustavo suarez ( 2009 ), " the evolution of a financial crisis : runs in the asset - backed commercial paper market, " unpublished paper, board of governors of the federal reserve system, division of research and statistics, august. moreover, the scale of these conduits and their vulnerability to runs contributed importantly to the liquidity panics globally as many of these programs were sponsored by non - u. s. banks ( see carlos o. arteta, mark carey, ricardo correa, and jason kotter ( 2009 ), " revenge of the steamroller : abcp as a window on risk choices, " unpublished paper, board of governors of the federal reserve system, division of international finance, may ). see brian f. madigan ( 2009 ), " bagehot's dictum in practice : formulating and implementing policies to combat the financial crisis, " speech delivered at this symposium, sponsored by the federal reserve bank of kansas city, jackson hole, wyo., august 21 - 23. see bagehot, lombard street. are well positioned to offset the ensuing sharp decline in liquidity and credit provision by the private sector. they must be prepared to do so. the role of liquidity in systemic events provides yet another reason why, in the future, a more systemwide or macroprudential approach to regulation is needed. 21 the hallmark of a macroprudential approach is its emphasis on the interdependencies among firms and markets that have the potential to undermine the stability of the financial system, including the linkages that arise through short - term funding markets and other counterparty relationships, such as over - the - counter derivatives contracts. a comprehensive regulatory approach must examine those interdependencies as well as the financial conditions of individual firms in isolation. conclusion since we last met here, the world has been through the most severe financial crisis since the great depression. the crisis in turn sparked a deep global recession, from which we are only now beginning to emerge. as severe as the economic impact has been, however, the outcome could have been decidedly worse. unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year