remarks by ms caroline abel governor of the central bank of seychelles at the opening of the cbs 40 th anniversary exhibition 7 november 2018 venue : international conference centre of seychelles president of the court of appeal principal secretaries board members, management and staff of the central bank of seychelles, distinguished guests ladies and gentlemen good morning. it gives me great pleasure to welcome you all here today, on behalf of the central bank of seychelles, to the opening of this exhibition being held in commemoration of the 40th anniversary of the establishment of a central banking institution in seychelles. the seychelles monetary authority, the precursor to the central bank of seychelles, was established a mere two years after seychelles gained its independence. this was the ultimate act that validated us as a sovereign state, with the ability to issue currency, manage our reserves, inspect banks and financial institutions and perhaps most importantly, set our own monetary policy objectives. fast forward forty years, and we are proud to say that we have achieved a lot in a relatively short space of time. through various technical assistance, capacity building exercises and exchanges with other central banks in the region, the central bank of seychelles has evolved into a well - respec ted institution, both at home and abroad. one notable achievement is that seychelles is the most financially included country in the sadc region, based on a study conducted in 2016. this means that our financial system is on the right path to ensure that all individuals and businesses have access to financial services and products that are affordable and that meets their specific needs. on the flip side of the coin, we face many challenges, some of which emanate from within our organisation, while others are unavoidable consequences of factors on the global market, to which our island economy is acutely susceptible. however, as a central bank, we cannot allow ourselves to fall in the face of these adversities, but rather, we strive to turn those challenges into opportunities for positive change. one of the biggest challenges that we ’ ve had to face during the four decades of our existence, was the global financial crisis of 2008. our debt - to - gdp ratio was at 151. 3 % in september of that year and our external reserves had depleted to below one month of imports as at october 2008. the country then embarked on a macroeconomic programme with the support of the imf and as the saying goes, the rest is history. in a mere ten years, we have steered clear of that crisis and have become one of the success stories not

. this is essentially the approach the ecb has been using since march last year, when we deployed a three - sided reaction function to make our decisions more robust : a forward - looking component – our inflation projections – and two more current - looking ones, the dynamics of underlying inflation and the strength of monetary policy transmission. 3 / 6 bis - central bankers'speeches we have also made more use of scenario analysis to help us understand the risks around our projections if certain assumptions turn out differently. this framework served us well in calibrating when to stop raising rates, how long to hold them constant and, most recently, when to start cutting them. and for the time being, we will continue to use it to set the rate path in an uncertain environment. the second tension is between independence and interdependence. central banks make decisions independently, but those decisions are interdependent with the actions of other authorities. when policies are well aligned, that interdependence can lead to virtuous circles which help all authorities deliver on their objectives. for example, increasing government investment to reduce energy supply constraints may make medium - term inflation lower and less volatile. that would, in turn, warrant lower policy rates over time, encouraging more investment, and so on. but faced with " existential " risks like geopolitical conflict and climate change, it is natural for people to ask whether central banks can contribute more explicitly. in my view, the answer to this question has two parts. first, the evidence we have so far suggests that the new types of shocks we are facing are likely to put upward pressure on prices, at least initially. one recent study based on data since 1900 finds that geopolitical risks lead to high inflation, lower economic activity and a fall in international trade. 9 and climate change is likely to initially appear as a negative supply shock – although over time investment in renewables, grids and storage will lead to lower and more stable energy prices. in this setting, it is important that we continue to focus on inflation and stabilise inflation expectations at our target. we know that the public detests high inflation, and allowing it to become embedded in the economy would disrupt our politics and undermine all other geopolitical and climate goals. however – and this is my second point – as a changing climate and geopolitical fragmentation have implications for our mandate, there is scope for action within our mandate. let me give you a few examples. the