In contrast to developments in M3, the growth rate of the narrow monetary aggregate M1 has – after a trough in the third quarter of 2008 – started to rise again, and reached 5.3% in the first quarter of 2009. While M1 developments usually prove inferior to M3 developments in terms of their information content about future inflation, in the case of the euro area they have traditionally exhibited good leading indicator properties for future real GDP growth. Taken per se, such a development would also speak against a deflationary scenario and might offer valuable insights into the timing of the recovery. To conclude, monetary indicators provide important information to try understanding the likelihood of different scenarios ahead. In this respect, the real-time problem which is always prevalent in monetary analysis – but also in other types of analysis – becomes more serious in a financial crisis. 4. Short and long term policy responses to the crisis  There are inevitable challenges associated with policy actions in times of crisis. Central banks around the world have embarked on untested areas of monetary policy-making. Expansionary fiscal policies and government interventions to stabilise the financial sector are expected to dramatically increase public debt. This could pose a severe threat to the sustainability of public finances and eventually to macroeconomic stability. To preserve macroeconomic stability over the medium term, there is a need for careful monitoring of the policy stimulus over the policy-relevant horizon, combined with well-designed exit strategies from non-standard policy-making.
If the trilemma is in fact a dilemma, then countries will have to choose between monetary independence and closing their capital accounts. 2/4  BIS central bankers' speeches  I would question the generality or starkness of this dilemma. For example, I do think that the euro area can determine its own course. Our asset purchase programme has contributed to a spread exceeding 250 basis points between the 10 year yields in the US and in Germany. Likewise, the gap between policy rates in the US and the euro-area is the widest since 2009. More technically, an estimated Taylor rule for the euro area that includes US monetary policy as one of the explanatory factors finds only a very modest co-movement between the two. What is more, countries seem to be arranged along a continuum, with some exhibiting total independence at one end to those with exchange rates pegged to the US dollar at the other. So they don’t have to choose one of the two polar positions but can pick an intermediate position. For example, putting some temporary restrictions on cross-border movement of capital could give some but not complete independence of monetary policy. But is there more that central bankers can do to manage the tensions created by this economic divergence? Put another way, how do we reconcile yet another paradoxical couple: independence and co-operation? In my view, we can and should act to enhance co-operation between central banks, based on four building blocks: Mutual predictability of policy making.