After all, it is beyond doubt that those who took out mortgages at nominal rates have benefited greatly from negative real rates. There is no reason for such subsidy to continue with contributions from the Treasury. We are looking ahead to a time when we must wage a full-blooded assault on inflation. Hopefully this period will be short-lived, but while it is ongoing, lenders must work effectively with their customers so as to keep their debt service burden within tolerable limits. Most borrowers in the housing market have strong equity and therefore considerable scope for adjustments and restructuring. On this front, lenders must behave responsibly. Honoured guests:  6/8  BIS - Central bankers' speeches  The past few weeks of unrest in foreign financial markets - including the collapse of two banks in the US and the forced merger of two large Swiss banks - have opened people's eyes to how closely monetary policy, financial stability, and financial supervision are connected. In the US, weaknesses in the regulatory framework and the supervision of financial institutions not considered systemically important, together with the lack of an overview of financial stability, have prompted the Federal Reserve to slow down its policy rate increases. It has been said that monetary policy is handcuffed by financial instability in the US and elsewhere, and that central banks cannot take the necessary action against inflation because of systemic risk in the financial market. This situation erodes the credibility of monetary policy. It is our loss as well.
The stage was therefore set for the floodgates to open and private consumption to come gushing back as soon as public health measures were lifted early in 2022 and consumers had an opportunity to exercise their purchasing power. The objective of all economic policy is to maintain equilibrium in the domestic economy, to ensure that there is "neither too little nor too much", to paraphrase Thorbjørn Egner's When the Robbers Came to Cardamom Town. During the pandemic, economic policy leaders had to take on the biggest contraction in output since the end of World War II, followed by an abrupt turnaround and a torrent of demand together with an unexpected jump in import prices. The first half of the job keeping the economy up and running during a deep downturn - went well. But the second half - restoring equilibrium after the pandemic - is turning out far trickier. The surge in inflation that followed the pandemic took the world's central banks by surprise. Early on, there was talk of a temporary adjustment - inflation would evaporate, and quickly, too. That proved to be wishful thinking. On that front, Russia's invasion of Ukraine - with the associated surge in commodity, fuel, and food prices and disruption of supply chains - had a serious impact. The unfortunate fact is that inflation has hit double-digit levels in many parts of Europe. Every central bank on the continent is still in a monetary tightening phase.