ewart s williams : building individual and organisational capacity feature address by mr ewart s williams, governor of the central bank of trinidad and tobago, at the co - operative credit union league, launch of events calendar 2011, chaguanas, 26 january 2011. * * * i wish to thank the co - operative credit union league for the invitation and extend a happy new year to you and your organisations. it has been some time since i have met with the credit union movement, so i welcome this opportunity. you have suggested that i address the topic “ building individual and organisational capacity ”. i am not sure that i could tell you much about this, since your credit unions, in order to survive in this increasingly competitive environment, have had to expend considerable efforts in capacity building. i, however, welcome the opportunity to offer my variation on this theme since, in my view, the outlook both for the economy and for your sector will require you to intensify and, indeed, broaden your capacity building efforts, if you are to maximize your contribution to your membership and adhere to the new regulatory paradigm that is on the way. permit me to put my views against the background of the following recent developments : as you know, the decline in economic activity in 2009 was followed by another year of economic stagnation in 2010. the economic downturn was triggered by the sharp contraction of activity in non - energy sector ( most notably construction ) and was accompanied by a significant increase in unemployment. the official data show that unemployment rose from a low of 3. 9 per cent in the last quarter of 2008 to 6. 7 per cent in the first quarter of 2010. i guess, with your close day - to - day involvement in the community, you are in a better position to appreciate the real level of employment and underemployment in the country. the more challenging economic environment has led to a sharp rise in non - performing loans on the commercial banks ’ balance sheets – from 1 per cent to 5 per cent. the nonbanks, that cater to a somewhat different clientele have recorded an even more sizable increase in loan delinquency – from around 4 – 5 per cent to almost 12 per cent of total loans. fortunately, the banking system – both the banks and non - banks, have the resources to adequately provide for these bad loans. we, in the central bank, do not have up - to - date comprehensive data for the credit union sector.

otherwise it cannot lower interest rates when the next economic downturn occurs. of course, when the price stability target is achieved in a sustainable manner, interest rates are likely to increase reflecting inflation. however, interest rate hikes before the price stability target is achieved will instead bring about an economic downturn, which will be counterproductive. recently has discussed whether to update its framework. 11 key points of such discussions including these can be summarized as the following. 12 first, through the experience of japan's battle against deflation and the u. s. and european economies following the global financial crisis, policy tools such as qqe, a negative interest rate policy, and forward guidance have been added to the central banks'" arsenal. " they will be used going forward depending on the situation. second, the inflation target framework has been proved effective even in the time of the global financial crisis and its aftermath, but it has been pointed out that, even in the united states, where economic and price developments are relatively firm, interest rates have remained lower and room for monetary policy response has become smaller than before. under these circumstances, there are ongoing debates in the united states and other economies on what monetary policy framework should be adopted with a view to achieving the medium - to long - term price stability. various approaches have been proposed, such as setting a higher inflation target and introducing average inflation targeting, price - level targeting, the inflation target range, and nominal gdp targeting ( chart 11 ). every approach has its own advantages and challenges. of course, japan cannot be treated the same as other economies such as the united states, where the inflation rate is already at around 2 percent. the bank judges at present that it is appropriate to maintain the current policy framework in which it clearly commits to the price stability target of 2 percent and pursues the monetary easing to achieve the target. that being said, i think it is necessary for the bank to work sufficiently on studies toward better monetary policy. regarding the bank of canada's review of its monetary policy framework to date, see https : / / www. bankofcanada. ca / agreement - inflation - control - target /. as for the fed listens events that the federal reserve has proceeded with, see https : / / www. federalreserve. gov / monetarypolicy / review - of - monetary - policy - strategy - tools - and - communications - fed - listens - events. htm. with regard to