As the policy rate impacts the cost situation in the economy in general, it is difficult to circumvent it in the same manner as regulations can be avoided. On the other hand, regulations can be applied in a more differentiated manner, which can mean that they will be a less costly way to lean against the wind. Another advantage is that regulations increase resilience by building buffers, for example in the form of capital. Consequently, neither the policy rate nor regulations are preferable in all situations. The conclusion I have reached is that a combination of policy rate and regulations may be the most practical path. Concluding remarks The financial crisis has exposed problems and shortcomings, much as crises often do. As I see matters, this is not a decisive blow for the prevailing order, as far as monetary policy goes. I still believe that the best model is an inflation targeting policy conducted in an open and clear manner, and in which the work of clarification and development continue apace. However, it is obvious that we need to learn more about how financial imbalances should be handled, and that the crisis will have consequences for central banks’ methods of working. I have attempted to present a picture of a few of the challenges I see ahead. By necessity, this picture is quite sketchy and has been painted with broad brushstrokes. The final practical consequences of the intensive discussion currently being held cannot be predicted with any certainty at present.
3 See President’s Working Group on Financial Markets Report on Stablecoins (November 2021), Proposal for a Regulation of the European Parliament and of the Council on Markets in Crypto-assets, and amending Directive (September 2020), UK regulatory approach to cryptoassets and stablecoins: Consultation and call for evidence (January 2021) and Progress of Research & Development of E-CNY in China (July 2021). 4 Based on preliminary review of results from the May 2022 Senior Financial Officer Survey. A summary of aggregated results will be released by the Board of Governors in July 2022. 5 See Bank for International Settlements, Developments in retail fast payments and implications for RTGS systems (December 2021) 6 A recent BIS report found that 90 percent of central banks surveyed are engaged in some form of work on CBDC. See Bank for International Settlements, Gaining momentum - Results of the 2021 BIS survey on central bank digital currencies (May 2022) 7 Market rates can also affect the composition of liabilities at the central bank. 8 For the purposes of these remarks, tiered remuneration systems are included as a version of a floor framework. 9 Nessén, Marianne, Peter Sellin and Per Åsberg (2018), “The implications of an e-krona for the Riksbank’s operational framework for implementing monetary policy”, Sveriges Riksbank Economic Review, no. 3; Bindseil, Ulrich (2020), “Tiered CBDC and the financial system” ECB Working Paper Series No 2351 / January 2020. 10 Bindseil, Ulrich, The case for and against CBDC – five years later (February 19, 2022).