Conversely, in a sharp downturn with higher bank losses, it may be appropriate to reduce both the key policy rate and the countercyclical buffer. The countercyclical capital buffer is not a stabilisation policy instrument. The buffer is more likely to vary over longer credit cycles than follow the normal business cycle. Furthermore, knowledge and experience of macroprudential regulation is incomplete and at an early stage. 8 And we know from experience that financial market participants often find ways to evade regulations. 9 Taking the risk of a build-up of financial imbalances into account will therefore continue to be one of the criteria for an appropriate interest rate path and an important element in a robust monetary policy framework. 8  For a review of our currently limited experience of macroprudential instruments, see for example Smets, F. (2013): “Financial stability and monetary policy: How closely interlinked?” Lecture at a conference arranged by Riksbanken. 9  Jeremy Stein, member of the Federal Reserve Board of Governors, has pointed out that it is more difficult to evade the interest rate: “while monetary policy may not be quite the right tool for the job, it has one important advantage relative to supervision and regulation – namely that it gets in all of the cracks... changes in rates may reach into corners of the market that supervision and regulation cannot.” See Stein, J. (2013): Overheating in Credit Markets: Origins, Measurement, and Policy Responses. Speech at a research symposium sponsored by the Federal Reserve Bank of St. Louis.
It is clear that the events of 11 September, and their aftermath, have given rise to considerable uncertainties. There is plenty, particularly overseas, for central bankers to concern themselves with. When I spoke at a conference last week, one newspaper commented that I always looked worried. Well, of course, central bankers are paid to worry. But when reviewing the economic situation we need to achieve a sense of balance. The data do not all point in a single direction. Certainly in the run-up to the November MPC meeting we will need to take a careful look, as I indicated earlier, at all the data. Our feet will be on the ground, but our eyes will scan the horizon! Thank you very much. 4  BIS Review 87/2001