Jörg Asmussen: Stability guardians and crisis managers – central banking in times of crisis and beyond Distinguished lecture by Mr Jörg Asmussen, Member of the Executive Board of the European Central Bank, at the House of Finance, Goethe University, Frankfurt am Main, 11 September 2012. *  *  *  Ladies and Gentlemen, It is a great pleasure to be here today at the Institute for Monetary and Financial Stability and I would like to thank Prof. Siekmann and Prof. Wieland for their invitation. I know that the Institute was founded in November 2007, only three months after the outbreak of what would become the worst financial and economic crisis of the post-war period. Truly timely, I would say. The Institute’s objective to highlight the significance of monetary and financial stability impressively reflects the practise and the challenges of monetary policy over the last five years. Let me in today’s remarks take the opportunity to reflect on the double role of central banks as stability guardians and crisis managers. Had I been here before August 2007, this title would have mainly implied discussing the central banks’ role as guardian of price stability. But there cannot be stability without adequately managing the crisis. So, why have central banks assumed such an important role in crisis management? Well, responding to the sudden financial tensions, central banks crisis measures have contributed to calming and avoiding highly detrimental feedback loops between financial markets and the real economy.
Neither the Riksbank nor any other analyst perceived the monetary policy conducted to be leaning against the wind to any large extent, and the general impression was definitely not that the repo rate should have been left at the level to which it was cut during the financial crisis, that is, 0.25 per cent. 4  In the minutes, Lars Svensson presents estimates where the dotted yellow repo-rate path is assumed to give an inflation rate of 2 per cent from the beginning of 2013 and onwards and an unemployment rate that would reach what he assumed to be an equilibrium level of 5.5 per cent at the beginning of 2014. It may also be worth noting that at the ensuing meeting, in September 2011, all of the Executive Board members thought that 2 per cent was a suitable level for the repo rate, given the economic situation in Sweden. 5  National Institute of Economic Research (2011). 6  OECD (2011), pp. 191–192. 7  IMF (2011), p. 25 and Table 9. BIS central bankers’ speeches  3  A strange assumption Given this, it is very strange to claim that an evaluation of the Riksbank’s policy should rely on the assumption that the alternative of not leaning against the wind would be to hold the repo rate at 0.25 until today. If no one perceived it as such at the time, it appears very strange to paint this picture retrospectively.