jens weidmann : lessons learned from the crisis and economic policy challenges speech by dr jens weidmann, president of the deutsche bundesbank and chairman of the board of directors of the bank for international settlements, at the deutsche bundesbank's capital city reception, berlin, 17 october 2018. * * * 1 welcome esteemed ladies and gentlemen, colleagues, rocks can wander. straight, curved and zigzag furrows inscribed in the dry loam soil of the californian mojave desert are proof that even heavy boulders really can move out there. tracks stretching as far as one hundred metres have been discovered. 1 in the land of opportunity, this mysterious place is known as racetrack playa. for a long time, it was not known whether this was the work of pranksters or a natural phenomenon. that was until several years ago, when a team of researchers solved the mystery with the help of cameras, gps technology and weather data. after it rains at night during the winter months, a thin ice layer forms. when this ice begins to melt in the morning sun, it breaks up and “ sails ” along the meltwater. lights winds are then all that is needed to make these panels of ice slowly push rocks across the desert floor. the furrows become visible once they have been dried out by the wind and sun. 2 but what does this fascinating natural phenomenon have to do with the topics we are addressing today? heavy objects can be moved given the right combination of forces. the same is true of politics : it ’ s all about the interplay of forces. i would like to use my speech today to talk to you about the way in which political and economic forces work – looking back at the bank bailout during the financial crisis, and looking ahead to the challenges facing monetary policymakers in the euro area and economic policymakers in germany. exactly ten years ago today, the bundestag and bundesrat passed the financial market stabilisation act ( finanzmarktstabilisierungsgesetz ). one month after the collapse of lehman brothers, the then finance minister peer steinbruck explained that there had not been a financial crisis of such a magnitude in 80 years. to “ avert the danger ” 3 ] an extensive rescue package was put together, comprising up to €400 billion in government guarantees for financial institutions. ten years on from this herculean effort, many citizens are quite rightly asking how much it cost to

energy and food, is therefore likely to rise from 1. 1 % this year to 1. 8 % in 2020. and the headline inflation rate will probably persist at a level of 1. 7 % this year as well as in the next two years. from my point of view, this is certainly largely compatible with our medium - term notion of price stability. as a result, it is now time to set about exiting the very expansionary monetary policy. the governing council of the ecb didn ’ t set the boulder in motion in june, but you could say it got the ball rolling by indicating that it wanted to end the net purchases of government bonds and other securities at the end of the year. how the rest of the return to normal monetary policy pans out will of course depend on economic developments, especially the path of inflation. but the financial crisis has taught us not to ignore the impact of long - term risks on price stability, either. economists at the bank for international settlements underline that economic developments are affected not just by business cycles but also by financial cycles, which last for longer and fluctuate more strongly. 7 financial imbalances can ultimately be associated with deeper recessions and lasting damage to the real economy. because monetary policy can have an impact on the financial cycle, the bis researchers suggest extending the time horizon for monetary policy. this would allow longer - term risks to price stability from turbulence in the financial system to be factored into monetary policy decisions to a greater degree. given this long - term connection, it may be advisable, even for a monetary policy that focuses exclusively on the objective of price stability, to heed developments in financial markets. 3 economic policy challenges ladies and gentlemen, i fully understand that the current period of low interest rates is a testing time for savers. although households have for many years been able to offset their low levels of interest income – from savings, for instance – thanks to the good performance of other asset types, the real return on german households ’ financial assets entered negative territory at the beginning of the year. in part, this was because equity market prices lost some of their earlier dynamism. but it ’ s fair to say that citizens are not just savers – they are also employees, property owners and taxpayers. and as such, they benefit from the low interest rates. of course, interest rates will also gradually pick up as monetary policy returns to normal. but what level they will ultimately reach depends on conditions that