  Finally our balance sheet has a key role to play in supporting financial stability by providing insurance to banks and other financial intermediaries against liquidity risk – the risk that solvent firms cannot meet their financial obligations as they fall due. Of course we expect firms to self-insure against liquidity risk as part of prudent financial management. But it would be unrealistic and inefficient to expect them to insure against all shocks and so as a backstop we provide firms with the ability to borrow reserves (as well as dollars and euros). Liquidity insurance is very much an “old normal” – it goes back to Walter Bagehot in 1873 and his famous dictum to lend freely, at a high rate of interest and on good banking securities. But it is worth noting that, whilst liquidity insurance is an “old normal”, our current suite of facilities is much expanded over the last fifteen years. The Bank learned lessons from the GFC, launching a revised Sterling Monetary Framework in 2013 under an approach Mark Carney, the Bank’s former Governor and another former student of Peter’s described as Open for Business10. This expanded toolkit is just as much a part of the “new normal”.11  Of course the financial system is constantly evolving.
On the one hand, European economies are in recession, the US economy has been struggling to return to the path of growth, and more recently, fast-growing economies such as Brazil, India, China, Turkey have also slowed down. In such circumstances, it would be logical for the prices on the commodity exchanges worldwide to fall. But it is not happening. Prices of oil and basic agricultural products are not falling, but maintain the previously achieved high level or even continue to rise. In part, this is due to the overly relaxed monetary policy of the Fed, the ECB and the Bank of England, as well as the debt crisis in the Euro area, which “urge” investors to invest in real goods on the commodity exchanges. The rest is a consequence of the so-called supply shocks, i.e. political tensions in the Arab world and the Middle East, as well as the drought in the countries that are the largest producers of grain. In such conditions, despite the slowdown of economic growth, Macedonia is facing a higher imported inflation. In conditions of such an emphasized economic crisis, how will the monetary policy be put into operation to encourage economic growth? You claim that the NBRM can contribute only by keeping price stability, but obviously it is undermined. Price stability is neither undermined nor will it be. In August and September, a higher than usual monthly price increase for this time of the year was registered, due to one-off factors that I have already explained.