Particular attention should be paid to abrupt repricing moves in risky asset prices, in the wake of rising interest rates. This situation could put some non-bank financial actors in difficulty, especially the ones using leverage, as illustrated by the Archegos’ default at the end of March 2021. Likewise, given the role played by Russia and Ukraine in the supply of energy and more widely some commodities, rising prices and volatility in commodities markets have led to a major increase in the magnitude of margin calls for derivatives, in particular for energy and agricultural products. Such margin calls have generated liquidity strains for commodity market participants, which require strong vigilance notably to ensure that any possible default should remain idiosyncratic and does not develop into a systemic chain. The banking sector has proved resilient so far and has contributed to soften and not amplify shocks. Given the uncertainties about the macroeconomic and macrofinancial outlook, it is important that banks’ capacity to absorb shocks is maintained going forward and possibly strengthened. Hence the relevance of a timely, fair and definitive implementation of the Basel 3 accord. With the Basel III agreements in 2017, we indeed reached thebest possible agreement to promote financial stability at the international level. With the publication last October of the Commission’s proposal for a new banking package to implement it, the European Union made a decisive and very balanced step.
In this regard and despite recent criticism, inflation targeting continues to be the most appropriate monetary regime to coordinate inflation expectations in both mature and emerging economies, not only providing transparency but also taking due consideration of time lags and uncertainties in the process of monetary policy implementation. In fact, the combination of short-term flexibility with the permanent commitment to price stability embedded in the framework makes it particularly suitable to the current environment. While disinflation will possibly be fast in mature economies, creating adequate conditions for monetary counter-cyclical actions in different countries, in emerging economies disinflation will probably be slower, particularly where the authorities have not prevented inflation from escalating recently, or where they did not retain a vigilant attitude. In any case, inflation targeting is the most suited framework to coordinate the public’s inflation expectations, particularly in an environment marked by growing uncertainty. BIS Review 147/2008  3