christian noyer : monetary policy and the crisis – some lessons for the future keynote address by mr christian noyer, governor of the bank of france, at the pariseuroplace financial forum, tokyo, 16 november 2009. * * * central banks have been very active over the last two years in containing the impact of the financial crisis. monetary policy has made an important contribution to stabilizing financial markets and the real economy. today, however, i will not talk about our response to the crisis, whether by conventional or unconventional measures. i will rather focus on the longer term and address two questions : " was monetary policy the cause of the crisis? " and " how can it contribute to preventing future crisis? " these are two different questions. and they call for differentiated answers. while i doubt very much that monetary policy played a major role in triggering the crisis, i also believe that it can – and should – help in the future to better contribute to financial stability. was monetary policy the cause of the crisis? one major success in the two last decades has been the achievement of price stability in most industrialized and many emerging economies. this success has rightly been ascribed to the monetary policy framework almost universally adopted in the world, which, beyond national differences and specific features, is based on two common pillars : central bank independence and price stability as a primary objective. price stability itself has coincided with – some would say produced – a prolonged period of strong growth and low output volatility, which, as you know, has been dubbed the “ great moderation ". one major disappointment however, has been that price stability has not led to financial stability. on the contrary, it seems that, over the last two decades, financial crises have become more frequent, with increasingly serious consequences for growth and welfare. to get a sense of this puzzle, it may be useful to look at the intrinsic dynamics of the financial system. both in normal times and times of stress, amplification mechanisms are at work, which exacerbate the impact of any specific shock. these mechanisms act through changes in leverage, liquidity, and risk aversion. these three factors interact in a complex and sometimes unpredictable way. for instance, growth in leverage may be fuelled by an increase in risk appetite. in turn, larger balance sheets of financial intermediaries give rise to liquidity expansion and growing risk appetite. it is easy to see how these dynamics can create strong procyclicality in the

new year address by the governor of the banque de france – paris, 9 january speech by francois villeroy de galhau, governor of the banque de france, chairman of the acpr press contact : delphine cuny ( delphine. cuny @ banque - france. fr ) page 1 of 5 i would like to start by extending, on behalf of the banque de france and the acpr, our warmest wishes to you with whom we work, day - in, day - out : financial centre players, elected representatives and public officials, and journalists. in the turbulent environment of 2024, we will need more than ever to counterbalance the pessimism of intelligence with the optimism of the will, and to remind ourselves that a full life combines both professional commitment and personal ties. so, first and foremost, i wish you much joy with those you love as well as in all your new projects in 2024. this year promises to be an eventful one : monetary union was 25 years old on 1 january, we will be celebrating 10 years of the european banking union, and france will of course be hosting the olympic games. there will also be two elections of key importance for our country beyond our borders : the european elections in june and the us elections in november. because the year ends " in four ", i would like to follow a process of simple addition and share 2 + 2 wishes with you. * * the first two wishes follow on from those i made before you a year ago. i would like to return to the economic progress achieved in 2023, and invite us to " finish the job ". 1. 1 less inflation and more stabilisation inflation remains the main concern of our fellow citizens, and our main mission as a central bank. at the beginning of 2023, i stated here before you that french inflation would pass its peak in the first half of the year – it has since declined from 7. 3 % in february to 4. 1 % in december i – and that we should reach the terminal interest rate " by the summer " – this occurred in early september. i also made a “ commitment ” that barring any new shocks we would bring inflation down towards 2 % by 2025 at the latest. a year ago, many people were expressing polite – or not so polite – scepticism. today, our forecast is much more widely accepted and believed : average inflation of 2. 5 % in 2024 and