as president of the monetary committee at the end of the 1970s, played a particularly important role in the design and establishment of the ems ( small wonder, if you realise that we shared a room as junior economists at the international monetary fund in washington, d. c. in the mid - sixties ). the second is jean - jacques rey who made two especially important contributions : first, as president of the committee of alternates of central bank governors at the time the emu chapter of the maastricht treaty was negotiated and, second, as chairman of the monetary policy sub - committee of the emi, which developed the operational framework for the implementation of the single monetary policy which has worked so well since january 1999. let me finally mention alexandre lamfalussy who, as the first president of the european monetary institute, played a key role in the process towards emu. without such figures, emu would never have become a reality. since january last year, the euro is a reality. the launch of the euro has been successful. inflation is low. economic growth is robust in a climate of price stability. my message to you today is clear. the internal stability of the euro will be maintained. the people, also here in belgium, can be confident that their savings and pensions will keep their value over time. this internal stability will help to turn the current upswing into a long period of high economic growth and falling unemployment. based on price stability and the strength of the euro area economy, the future of the euro is that of a strong currency. it is often the case that the achievement of past objectives paves the way to new and exciting challenges. and so it is now for the bank, which, along with the other national central banks ( ncbs ) of the euro area and the european central bank, has a new role to fulfil as part of the european system of central banks ( escb ) and of the eurosystem. the importance of this role should not be underestimated. the eurosystem operates in a decentralised manner. the single monetary policy could not therefore be successful without the essential work carried out by the ncbs of which the eurosystem is primarily comprised. in the implementation of monetary policy, the performance of operations by the ncbs ensures that the eurosystem benefits from their extensive operational experience as well as the contacts built up with the credit institutions operating in their domestic financial markets. in this respect, the activities of the bank

njuguna ndung ’ u : economic and financial developments in kenya speech by prof njuguna ndung ’ u, governor of the central bank of kenya, at the luncheon with members of the eastern africa association, nairobi, 21 january 2009. * * * the chairman eastern africa association, members, distinguished guests, ladies and gentlemen ; let me first thank the chairman of the association for this opportunity to share my experiences with economic performance, the conduct of monetary policy in 2008, and the perspective for 2009. the experiences of the central bank have been vast but i will deal with economic performance and policy directions in three topical areas : • the conduct of monetary policy and monetary policy decisions • economic growth outlook • the global financial crisis and kenya ’ s economic performance a. the conduct of monetary policy in 2008 the past year has been a difficult one both from a local and global perspective. for monetary policy at the central bank of kenya ( cbk ), three challenges emerged ; • liquidity management in the economy ; • inflation upsurge ; and • exchange rate volatility these challenges tended to take monetary policy management to unfamiliar territory. in order to ensure price stability or fight inflation, the cbk relies on indirect instruments that affect liquidity in the economy and so the stock of money, which in turn affects interest rates and prices in the desired direction. the debate on what are the targets and what instruments to achieve the targets is relevant. money supply growth was maintained within the target range for most of the months in 2008. ( i ) liquidity management in the economy the role of a modern central bank is in general price stability, that is to fight inflation. however, for the central bank of kenya, stability of the financial system is equally important, so is the national payments and settlement system. the bank implemented the first two objectives with varying degrees of success. while inflation was high we also faced downside risks to financial stability from the safaricom ipo. the size and nature of the ipo led to large shifts in liquidity, and the unwinding process would no doubt have had longer term impacts on economic and financial variables if not properly managed. the offer attracted ksh231 billion. liquidity was skewed in favour of a consortium of banks despite the mitigation mechanisms put in place by the banking system. the bank ’ s approach to this therefore was to mop up excess liquidity from the banking sector using the term auction deposit and repos