in particular, as they are more susceptible to a decline in purchasing power. chart 8 shows developments in the terms of trade. there has been a deterioration in the terms of trade three times since 2013 : from 2013 to october 2014, from 2017 to may 2019, and from march 2021 onward. the current deterioration is distinctive in its severity and in the significant impact of the rise in import prices. moreover, unlike the situation in 2017 – 2019 — when a rise in 3 / 6 bis central bankers'speeches import prices of crude oil was the main cause of the deterioration in the terms of trade — import prices are currently rising for a broad range of goods, not only crude oil but also metal products and lumber, reflecting supply - side constraints. if raw material costs — which have been hovering at a high level — are not smoothly passed on to selling prices, this will increase the risk that firms will not fully distribute their profits in the form of fixed investment and wages. 4 the third point is the possible effects of macroeconomic policies across countries and regions, particularly how the course of u. s. monetary policy will influence asset markets and global financial markets. 5 policy rate hikes in the united states will affect not only the economy there but also emerging economies, which are still on their way to recovery from the pandemic, through changes in capital flows in global financial markets. there is also concern about the risk that adjustments in the chinese economy, such as in the real estate sector, will exert downward pressure on its growth rate and thereby adversely affect the world economy. alongside this, as i mentioned earlier, close and careful attention is warranted over possible effects that geopolitical risks, including those related to the recent situation surrounding ukraine, will have on commodity and grain prices, the world economy, and global financial markets. conduct of monetary policy based on the outlook for economic activity and prices that i have described, i will outline the bank ’ s current monetary policy and recent policy decisions. i would then like to express my opinion about the bank ’ s monetary policy conduct. overview of current monetary policy and recent policy decisions the bank conducts monetary policy under the framework of quantitative and qualitative monetary easing ( qqe ) with yield curve control, aiming to achieve the 2 percent price stability target. this current framework consists of three components : yield curve control, the purchase of risk assets, and the bank ’ s public commitment regarding the future conduct of monetary policy. in addition, the bank has taken

short - term effect at best. regular foreign exchange purchases were stepped up in january and again in february. now, the bank purchases 1½ million us dollars daily and has purchased the equivalent of 11 b. kr. since the autumn. in the central bank ’ s view, various factors may have caused the krona to strengthen in recent weeks, not least expectations about the east iceland construction projects, a possible underestimation of the degree of slack in the economy at the moment, and increased fishing quotas. in assessing the exchange rate it is important to point out that in real terms the exchange rate is not much higher at present than its average over the past ten years. thus there is no possible way to claim that the current exchange rate is blatantly out of step with what is appropriate for the economy or is far from the real equilibrium exchange rate. it has also been claimed that there is a significant risk of deflation in iceland. the central bank considers the likelihood of this to be negligible. in fact, the talk of deflation can largely be expected to reflect international discussion of the same issue, with claims from various quarters that there is a risk of deflation in germany and the usa in the same way that has happened in japan. nothing suggests that deflation is looming in iceland – wage costs have risen, growth in money supply is robust, inflation expectations in the market are around 2 % or above, and one of the largest construction programmes in icelandic history is on the horizon. it may be added that, up until now, iceland has never had any problems in kindling inflation. in light of all the above, the central bank does not believe that there are grounds for a large cut in interest rates in order to bring down the exchange rate of the krona or dispel the risk of deflation, which is virtually nil anyway. such action would probably pave the way for subsequent overheating of the economy and inflation. the central bank will continue to base its interest rate decisions on its mandatory role of contributing towards price stability and on the joint declaration of the government and the bank from march 2001 which specifies the inflation target. through steadfast monetary policy which ensures price stability, monetary measures will contribute towards promoting a stable economic environment which is the foundation for the economy ’ s growth capacity in the long run. on the basis of the new inflation forecast and national economic forecast, the central bank announced a cut of 0. 5 percentage points in the