ewald nowotny : “ central bank policies – past challenges and future perspectives ” – session 1 speech by prof dr ewald nowotny, governor of the central bank of the republic of austria, at the ceremony to mark the 200th anniversary of the central bank of the republic of austria, vienna, 2 june 2016. * * * mr. president of the republic heinz fischer, prime minister christian kern, dear president mario draghi, ladies and gentlemen, it ’ s a great pleasure for me to welcome you today to the commemoration of the 200th anniversary of the oesterreichische nationalbank and we are very grateful and proud that such an eminent audience has followed our invitation to this celebratory event. in the two hundred years of its existence, the fate of the nationalbank has always been closely entwined with the fate of austria, for better and for worse. it is not by accident, that it was schumpeter, the great economist and short - term finance minister of the republic of austria, who said that the condition of the monetary system of a nation is a symptom of all its conditions, or in german, “ der zustand des geldwesens eines volkes ist ein symptom aller seiner zustande. ” if there is one lesson to be drawn from the eventful monetary history of austria, then it is that the greatest threat to financial and monetary stability has been, and continues to be, war. in fact, it was also war, which triggered the foundation of the nationalbank in 1816. when on june 1, 1816, emperor francis i signed the decrees establishing the privilegirte oesterreichische national - bank, he did so almost exactly one year after the conclusion of the congress of vienna, which marked the end of more than twenty years of war in europe. ultimately, the austrian empire emerged as one of the victorious powers, but the price of victory had been steep. a significant part of the war effort had been financed by issuing paper money, which resulted in high inflation. in addition, the austrian state had to declare default on its debt in 1811. as is always the case in periods of high inflation, the consequences for the population were disastrous. the agenda for the new bank can thus be summarized quite briefly : get the monetary system back in order. the most important ingredient for stability was the reestablishment of trust. the austrian people had lost their faith in

rate than we had forecast in june. however, this is partly counteracted by the fact that the underlying productivity growth in the economy may need some upward revision. in the forecast of inflation that we will be presenting in the inflation report to be published next week, we will no longer be basing our forecast on the assumption of an unchanged repo rate. the point of departure instead is the policy rate expected by the market in the period ahead, as reflected in implied forward interest rates. with this point of departure - and taking into account the different risks that we envisage - it is reasonable to believe that inflation one to two years ahead will approach our inflation target of two per cent. when the executive board convenes to discuss monetary policy on wednesday next week, future inflation prospects will of course will the decisive factor for our decision. it is likely that we also will have a discussion regarding how we should view the continued rise in house prices. personally, i do not think that there is any immediate hurry to raise the repo rate, something that the executive board also communicated in august. but it is clear nonetheless that this is the next natural step if the current outlook remains unchanged. when it may become appropriate to modify the currently very expansionary monetary policy depends, of course, as usual primarily on economic developments in the period ahead and on the assessment of future inflation. 4 / 4