andreas dombret : issues at the imf - world bank annual meeting 2013 statement by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the atlantic - brucke, washington dc, 9 october 2013. * 1. * * introduction ladies and gentlemen i would like to thank the hodges family for opening their house to us and for inviting me today. washington is busy with the annual meetings of the imf and the world bank. but there is even more going on. the g20 are also meeting, as are the financial stability board, the governors of the bank for international settlements and the institute of international finance. for a couple of days washington has become the mecca of the financial world. thus, it is good that this delegation from the atlantik - brucke has also come to washington to be part of it all and to gather information. i would like to give you a very brief overview of what economic issues will be under discussion. three topics will be at the center of interest : first, the global economic outlook ; second, current and future challenges for economic policy ; and third, institutional matters, such as the global reform of financial regulation. let us take a closer look at these three topics. 2. the global economy the global economy has improved, but growth is still moderate. in its latest world economic outlook, the imf projects global growth to reach 2. 9 % in 2013 and 3. 6 % in 2014. in doing that, the imf revised earlier estimates downwards. the underlying geographical pattern of this outlook is a bit scattered. growth in advanced economies is recovering, while estimates for emerging economies have been revised downwards. in the euro area, growth has picked up, but will remain weak. on the positive side, reforms in the crisis countries are progressing and initial results are becoming visible. the german economy has overcome its cyclical weakness and has returned to normal capacity utilization. 3. challenges for economic policy what are the challenges for economic policy? looking to the future, there are three major challenges we have to face. the first of these is the normalization of monetary policy in advanced economies. with improved economic conditions, it becomes more probable that interest rates will rise again. nevertheless, exiting from such a prolonged period of low interest rates will be difficult. it might cause volatility on financial markets and limiting this volatility will be decisive. emerging markets, in particular, will have to prepare themselves for potential

public - sector investment. labor market conditions have improved somewhat on the whole. although the unemployment rate remains at a high level and employment growth is weak, overtime working hours have increased, and the ratio of job offers to job applications has continued its gradual rise. with respect to price developments, domestic wholesale prices ( adjusted for seasonal electricity rates ) seem to have stopped declining although downward pressures from competition with imports remain strong. this development was supported by the yen ’ s depreciation to date, the rise in crude oil prices and the improvement in domestic supply and demand conditions, particularly in construction - related goods. corporate service prices have declined, particularly in rents and leasing charges, but the year - to - year decrease has become smaller. consumer prices ( nationwide, excluding perishables ) have stayed slightly above the previous year ’ s level as commodity prices have continued to fall gradually and service prices have risen somewhat. growth in monetary aggregates, measured in terms of the year - to - year growth rate of m2 + cds average outstanding, has remained at 3. 0 - 4. 0 per cent, albeit with some fluctuations. regarding money market rates, the overnight call rate ( uncollateralized ) on the whole has stayed below the official discount rate of 0. 5 per cent. the 3 - month cd rate has moved at around 0. 5 per cent. meanwhile, with regard to the market ’ s interest rate expectations, 3 - month euro - yen futures declined at a somewhat brisk pace between the second half of july and autumn 1996, and have moved at around 0. 7 - 0. 9 per cent since september 1996. as the market ’ s expectations of higher interest rates receded, the long - term government bond yield has declined since mid - july 1996, and recorded a historical low of 2. 34 per cent in early december. recently, it has been moving at around 2. 4 per cent. with respect to bank lending rates, the short - term prime lending rate has remained at a record low level of 1. 625 per cent since september 1995. the long - term prime lending rate was lowered by a total of 0. 8 percentage points in september, october, and december to reach a record low of 2. 5 per cent, reflecting developments in long - term market rates. in these circumstances, short - term and long - term average contracted interest rates on new loans and discounts have moved at record low levels. on the stock exchange, the nikkei 225 stock average had