1980s and 1990s ) could be a way of making sdrs more attractive as reserve assets and expanding the sdr ’ s role as a unit of account in trade and finance. the ultimate goal would be to create the conditions for an expanded role of the sdr in the international monetary system. to jump - start this process, public authorities could undertake coordinated actions such as issuing sdr - denominated debt, helping create market infrastructures and providing legal certainty. – i believe that in order to have a chance to work in practice, such actions would need to be part of a long - term strategy supported by a strong political commitment. my understanding of the experience of the private ecu is that a key factor of its success was the link to the long - term process of european monetary integration, which provided not only a legal, economic and institutional frame of reference but also a strong political constituency. by analogy, making the sdr a credible reserve asset and unit of account for both official and private agents would probably require a commitment to eventually transform it into something more than a basket, i. e. a currency in its own right. as we know, we are still very far from having a broad consensus on such a prospect. bis central bankers ’ speeches 4. the reform of the international monetary system : the role of the g20 and of the imf to summarize, we have an international monetary system that lacks an effective mechanism for ensuring the mutual consistency of national policies. the costs of this in terms of distortions and instability are already evident, and will probably be further exacerbated as the world becomes more integrated economically and financially. on top of this, as we move toward a multipolar system we will need even greater cooperation to manage this process and contain the risk of instability. indeed, the need to review the functioning of the international monetary system was put on the g20 agenda early on after the crisis. following some bold g20 statements, there was even hope that a “ new bretton woods ” system could be shaped under the aegis of the g20. in this spirit, a group of former senior policy - makers assembled by michel camdessus, alexandre lamfalussy and tommaso padoa - schioppa ( the palais - royal initiative ) chose to emphasize in their report the great urgency of tackling the reform of the international monetary system, and proposed a number of significant and far - reaching changes in the current arrangements. but despite

no need to increase further what is already undeniably a tight monetary stance. on the other hand, if nothing of particular note is reported, the analysis at hand when the current interest rate decision was made will determine the decision on december 21 and a policy rate hike could be in the offing. as far as can be seen, there is reasonable consensus on the central bank ’ s decision among the main observers in iceland and abroad. people may well question and in fact some already have the bank ’ s grounds for its concerns and its strongly worded message, bearing in mind the short - term and long - term downturn in inflation, slower credit growth, lower oil prices and substantially less wage drift than was feared. the answers are obvious from the bank ’ s core writings on these issues. they show that a tight monetary stance must be maintained for longer than would seem to be generally expected. inflation has certainly slowed down but it is still running high and will continue to do so, and for quite a while will remain incompatible with the target and main tasks assigned to the bank. almost everywhere we look, strong pressures persist in the economy. the labour market is greatly overstretched and labour demand is enormous. this has been met with heavy imports of labour and it is questionable whether such a swift influx is necessarily beneficial or healthy for iceland in the long run, despite making the battle with inflation easier for the moment. in the banking sector, credit growth remains robust even though it is now slower than at the peak, and is still unsustainable in the long term. now that the banks have fortunately managed to secure medium - term funding, the risk is that they will become more complacent and ease their restraint. such signs seem to be emerging. the housing market appears to be picking up again and household and business sentiment is still very upbeat. finally, iceland ’ s current account deficit relative to gdp is presently the widest in the world. and while it is forecast to shrink next year, the deficit will remain large and eventually have to be settled. funding the accumulated deficit will leave the economy highly dependent on investors and creditors in the markets, with precious little scope for manoeuvre. thus the icelandic economy is exposed to potential shocks which may prove tough to tackle. the treasury is in a strong position and has achieved much in recent years. but according to a familiar pattern, the treasury may be less willing than usual to proceed cautiously at this stage of the electoral term, and