philip r lane : inflation in the short term and in the medium term welcome address by mr philip r lane, member of the executive board of the european central bank, at the ecb conference on money markets, 8 november 2021. * * * welcome to our annual conference on money markets. this is a prominent event in our calendar : it is difficult to over - state the importance of understanding money markets for the design and implementation of monetary policy. money markets are a seismograph for central bank liquidity conditions and market expectations of future policy, while money market rates are central to the transmission of monetary policy through their impact on economy - wide financing conditions. in recent weeks, there has been volatility in money markets around the world, as traders work to absorb the implications of the recent increase in inflation rates for central bank policy decisions. at the ecb, our decision - making is guided by our new monetary policy strategy, as demonstrated by the revision of our interest rate forward guidance that we decided in july. a central element in our monetary policy strategy is the principle that if the economy is close to the effective lower bound it is necessary to adopt especially forceful or persistent monetary policy action to avoid negative deviations from the inflation target becoming entrenched. despite the high current inflation rate, the analysis indicating that the euro area is still confronted with weak medium - term inflation dynamics remains compelling. in particular, the backdrop of the adverse demand shocks and positive supply developments during the pre - pandemic period — in which inflation averaged just 0. 9 percent between 2014 and 2019 – has had a persistent impact on price - and wage - setting dynamics. in 2020, the inflation rate further declined to 0. 3 percent on account of the initial adverse pandemic shock to the economy and inflation. the euro area has been confronted for an extended period with extensive slack and weak medium - term aggregate demand conditions, as reflected in the chronically - large aggregate current account surplus. while fiscal policy has been forcefully counter - cyclical during the pandemic ( including the launch of the innovative next generation eu initiative ), the capacity of fiscal policy to support aggregate demand dynamics over the medium term is constrained by high aggregate national debt levels and the absence of a permanent central fiscal capacity. these factors reinforce our strategic assessment that extensive monetary accommodation is required to ensure that inflation pressure builds up on a persistent basis in order to stabilise inflation at two per cent over the medium term. how do we reconcile the current high

davið oddsson : economic and financial developments in iceland address by mr davið oddsson, chairman of the board of governors of the central bank of iceland, at the bank's annual meeting, reykjavik, 30 march 2007. * * * chairman of the board of governors, prime minister, ministers of government, ladies and gentlemen : on behalf of the board of governors i welcome you all to this, the 46th annual meeting of the central bank of iceland. at the bank ’ s last annual meeting it was announced that the government of iceland and the central bank had been in consultation on the need to boost the bank ’ s foreign reserves substantially and also to improve its capital position. their motivation for doing so was not, however, that either position had weakened, nor that the bank no longer met the benchmarks for capital and foreign reserves. for a long time the minimum foreign reserve has been set at an amount equivalent to three - months ’ imports, and this level has always been ensured. however, the major changes – which could even be called revolutionary – that have taken place in iceland ’ s financial sector over a relatively few years prompted the board of governors to regard it as prudent to take other factors into account, such as the size and scope of the financial sector. as far as the capital position is concerned, it can be said that clear guidelines are to be found in recent legislation on the central bank. the clause in the law dealing with the transfer to the treasury makes some for provision for whether the bank ’ s capital has reached a specified minimum relative to the size of the domestic credit system. the central bank act states that an amount equal to two - thirds of the central bank ’ s profit shall be paid annually to the treasury. however, the bank pays only one - third of its profit to the treasury if its capital is equivalent to less than of 2. 25 % of the amount of lending and domestic securities in the credit system. at present the bank ’ s capital is still a long way short of this legal reference level, and its annual profit will not suffice to strengthen it markedly anyway. growth has not only soared in the icelandic credit system, but on an increasing scale each year has also been associated with foreign markets, where credit institutions ’ activities have expanded enormously. these changes also give grounds for considering other terms of reference for foreign reserves than import levels alone. as the prime minister stated in his speech earlier, the government responded positively to the points raised