Jaime Caruana: Presentation of the Bank of Spain’s annual report Speech by Mr Jaime Caruana, Governor of the Bank of Spain, to the Governing Council of the Bank of Spain on the presentation of the annual report, Madrid, 14 June 2002. *  *  *  A year ago I addressed you in my first presentation of an Annual Report, that for the year 2000. At the time I highlighted the importance of an impending event: the introduction of euro notes and coins. This event clearly symbolised the culmination of monetary union in Europe, a process set in train ten years earlier and coming to fruition against a background of enormous expectation not free from uncertainty. It is only fair today to start by stressing the success of the cash changeover, which was notably smooth despite the complexity inherent in such a singular, large-scale and radically novel operation. Underpinning this success was the collaboration of all the sectors concerned: households and firms and, in particular, the banking system and the distribution sector, without whose contribution the changeover of notes and coins would have simply been unviable. The fact that such a far-reaching change should have found such widespread support in society ultimately reflects European citizens' acceptance of their new currency and their confidence as to the benefits they may reap from it. With the culmination of this process, the euro area is consolidated as an extensive and stable monetary zone.
First, in response to the Global Financial Crisis of 2008 the Bank increased the supply of liquidity in pesos and dollars – through repos and swaps –, augmented the extensions of the swap program, and broadened the range of eligible collaterals. They were all measures designed to align market rates with the Monetary Policy Rate and to mitigate foreign currency liquidity tensions. Forward guidance was also an important tool. With the Monetary Policy Rate close to zero – we cut the interest rate from 8.25% to 0.5% in less than a year – , communicating that we planned to keep a very low short-term interest rate for an extended period of time. This was essential in keeping medium and long term interest rates low. These measures – as well as some other more exogenous developments such as the rapid recovery of commodity prices – allowed the economy to rebound quite fast from a mild recession in 2009. Actually, in the post-crisis years GDP growth was above 5% in a context of low inflation. Over time, these measures were eliminated, but certainly the lessons we learned from the crisis have been incorporated into our policy analysis and toolkit. Among the most significant I would mention two: First, the fact that the central bank must be rapid to respond and use all the available tools if necessary.