Owing to financial stability in the banking sector, the key rate decrease has quickly and successfully translated into the easing of monetary conditions and supported the economy, 1/3  BIS central bankers' speeches  despite higher credit risks. Unlike the previous crisis periods, this year we have managed to prevent a contraction in lending. In addition to the key rate cuts, lending is also promoted by the regulatory easing and other measures implemented by the Bank of Russia. The preferential programmes launched by the Government are another important contributor to the easing of monetary conditions. In particular, preferential lending accounts for nearly one-fourth of new loans granted in recent months to small and medium-sized enterprises and about one-half of new mortgage loans. Nonetheless, the anti-crisis support measures implemented by the Government and the Bank of Russia will be gradually terminated. We also take into account that it is essential to maintain accommodative monetary conditions next year in order to stabilise inflation close to 4% over the forecast horizon. When making our decisions on the key rate, we also estimate how saving behaviour is adjusting to lower interest rates in the financial market. We are aware that in this case financial institutions, companies and households need time to adjust to the new conditions. This is especially relevant since the pandemic, declining incomes and higher uncertainty may dramatically alter consumption and saving models. Seeking higher returns, individuals are increasing demand for various instruments in the financial market.
Philipp M Hildebrand: Developing countries and international capital markets Summary of a speech by Mr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, to economiesuisse, Zurich, 14 June 2005. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  After having plummeted on the back of the Asian crisis, capital flows to developing countries have risen considerably again in the last three years. In 2005, they are likely to reach the approximate level at which they stood shortly before the Asian crisis. Capital flows are channelled mostly to a few emerging markets, notably China. China’s monetary order is currently undergoing profound changes, with the country gradually liberalising capital movements. The concept of the “impossible trinity”, which was developed by the Nobel Prize winner Robert Mundell, asserts that this will inevitably lead either to a loss in monetary autonomy or to a flexibilisation of the exchange rate regime. Both trends can be clearly observed: the pressure on the fixed exchange rate on the one hand, and the rapid expansion of the monetary and credit aggregates on the other. In the longer term, China’s monetary order will probably move towards floating exchange rates. This transition will hopefully be successful. As China’s monetary policy of gradual change has so far proved its worth, it is likely to serve as an example to other developing countries.