of tradable goods has been negative for the past few months. in the past 12 months, prices of tradable goods declined by 0. 86 percent. this means that we are basically importing deflation from abroad, some of which can be attributed to the level of appreciation of the exchange rate, and some is simply the low inflation rates from abroad. in contrast, in nontradable goods, we are still seeing inflation at the mid - point of the target range – about 2 percent. as such, when discussing inflation, we find that both the expectations, and the inflation derived from domestic developments are not in the dangerous area of deflation, in contrast with many countries in which the central banks must take into consideration the concern of entering deflation. regarding developments in the real economy, we see that growth in the israeli economy is very much in line with growth in the advanced economies that are our major trading partners. with that, the intensity of the waves of growth and moderation is very different. just as in looking at inflation, here too we ask ourselves to what extent developments in israel derive from what is happening abroad, and how much of it is derived from what is happening here. in 2013, gdp grew by 3. 3 percent, but if we adjust for the effect of the start of natural gas production, growth was about 2. 5 percent. the bank of israel research department ’ s forecast for 2014 is for growth of 3. 1 percent – this is the forecast from the end of march, and obviously we update the forecast on a regular basis every three months – and after adjusting for the effect of natural gas production, the forecast is for growth of 2. 8 percent. in other words, after adjusting for the effect of natural gas production, the forecast is for some acceleration of growth in 2014, and not the opposite. with that, data for the first quarter of 2014 were recently published, and were disappointing. gdp grew at a rate of 2. 1 percent, bis central bankers ’ speeches including a decline in private consumption, not only in the consumption of durables, but also in current consumption, which is very rare. the last time we saw negative growth in private consumption was at the height of the global financial crisis. the question arises as to whether these are really serious signals of moderation in the growth of the economy. in this context, we must remember that first quarter data in the us and europe were also disappointing, and some of that is related to

different to the objective of promoting the safety and soundness of individual firms or that inflation is kept at target. with the benefit of hindsight, policymakers and regulators should all have paid a great deal more attention to these ideas in the early years of the century while the great financial crisis was in the making. in fact, it is difficult to find any newspaper reference at all to macroprudential policy in those years. the opposite is true today. last year there were over 350 newspaper references in the uk alone. the great financial crisis validated these ideas for many policymakers world - wide. it was clear with hindsight that we had not only mis - estimated the risks in individual institutions. more importantly, we had not really understood the risks created by the dynamics of the system including from outside the core banking system, namely the amplifiers and feedback mechanisms that drove the system down in the same way that they had driven it up. or the devastating effect all of this would have not just on the financial system but on the broader economy. the dynamics of the system itself create risks and costs that markets and firms do not – and cannot – take fully into account in their decisions and their pricing. for example, in a financial crisis individual banks will try to cut lending – to deleverage – to preserve their funds. but if see crockett, a ( 2000 ) ‘ marrying the micro - and macroprudential dimensions of financial stability, bis speeches, 21 september. also, see borio, c ( 2003 ) “ towards a macroprudential framework for financial supervision and regulation? ”, bis working papers, no. 128. bis central bankers ’ speeches all banks do that then, as we saw, the economy will suffer which damages all banks. i suspect central banks over the centuries had an intuitive understanding of these risks. but they were never so great before the development of a truly global, liberalised financial sector in a digital age. and they were never clearly identified but instead were wrapped up with many other risks in the historically opaque world of the central banker. one key outcome of the crisis was the recognition that in the modern global economy, there is a need for international standards to cover macroprudential as well as microprudential risk. these have been developed and coordinated by the financial stability board, which was itself created in response to the crisis. and there is likewise a need for national public authorities that are clearly responsible for managing these risks. macroprudential