Opening remarks at OeNB monetary policy panel by Andrew Bailey Given at Oesterreichische Nationalbank, Annual Economic Conference, Vienna  Published on 23 May 2022  Remarks This is a time of very large economic shocks, and particularly very large external shocks, most recently from Russia’s invasion of Ukraine. I say that as someone who wholeheartedly supports the cause of Ukraine and the assistance we must give. We are in a period of rapidly rising energy, goods and some food prices. These are the most visible prices too. This is by far the main cause of high inflation, and is painful, particularly for those less well off. What can and should monetary policy do? There is a very important distinction between: whether monetary policy can anticipate and stop the effects on inflation of shocks; and, if not, whether it should respond when they happen? With shocks such as pandemics and wars, the answer to the first question is more likely to be “no”. But the answer to the second is very much “yes, monetary policymakers can and must take the actions needed to return inflation to target over a period that avoids unnecessary volatility in the economy”. It is domestic actions that have to get us back to price stability. For monetary policy, the choice of policy actions is influenced by the nature of the shock we are facing. In the UK we are facing a very big negative impact on real incomes caused by the rise in prices of things we import, notably energy.
The contributions to the FSR show that most commitments have been materialized in a regulatory framework that is currently being finalized: in particular, at the international level, in April 2012 the CPSS (Committee on Payment and Settlement Systems) and the IOSCO (International Organization of Securities Commissions) published the “Principles for Financial Market Infrastructures” that update, strengthen and broaden the former standards applicable in the different jurisdictions. BIS central bankers’ speeches  1  I will pay a particular tribute to the leadership of the US lawmakers in this field of regulation and the personal action and involvement of Senator Dodd, with the law named after him and his colleague Senator Frank. European Union legislation with EMIR (European Market Infrastructures Regulation) has also marked a decisive step to address the need for further security and transparency on OTC derivatives markets. But the contributions to the Financial Stability Review, also show that reforms must be pursued. Before we get to the discussion, let me briefly give you some personal thoughts on this. Efforts in the reforms should tend to establish a comprehensive, adequately calibrated and consistent regulatory framework. 1. There is a need for a comprehensive framework. This means that we have to extend and complete security and transparency. •  First, pay a close attention to the regulation of OTC derivatives that will remain noncleared.