Moreover, both of these are most effective when supported by a dynamic and adaptive policy regime. •  The simple reality is that countries with robust financial systems, strong fiscal accounts, low inflation, credible and coherent monetary and exchange rate policies, moderate external and internal indebtedness, reasonable current accounts, and adequate domestic savings rates are less likely to be buffeted by financial and economic turbulence. Moreover, when shocks do occur, such countries tend to be far more resilient. •  There is also considerable agreement on many of the elements needed to achieve these goals. This agreement has been reflected, in part, in the development and promulgation of globally accepted standards and codes for best practices in areas ranging from transparency in fiscal, monetary, and financial policies, to public debt management, and core principles for bank supervision. Guiding themes across these various standards have included the importance of consistent disclosure practices and of building stability up from the firm and sector level. The latter is accomplished by encouraging sound risk management and stronger balance sheets, and creating efficient systems of market, legal, and regulatory discipline. •  But the learning process continues. For example, in this country, recent experiences have brought to light the need to do more to strengthen corporate accounting and disclosure standards, particularly with regard to guarantees and complex financial arrangements, such as those funded offshore or through special-purpose entities. •  Our ongoing efforts to revise the Basel Capital Accord also reflect a learning process.
This, in essence, is attributable to the prices of imported goods, which are down by comparison to their high levels in 2008. However, inflation for domestic goods and services, despite weakening during the year, will remain above 1%. BIS Review 77/2009  3  The outlook for the following years has been very slightly adjusted upwards. We shall return to this point in a few moments. Monetary policy decision At our monetary policy assessment in March, we identified a number of elements that led us to foresee negative inflation for 2009 and a risk of deflation for 2010 and 2011. In view of this threat, we relaxed monetary conditions by taking supplementary measures. We reduced the three-month Libor target range by 25 basis points to 0–0.75%, aiming for a rate of 0.25%. In order to achieve this, we granted longer-term repo credits and concluded foreign exchange swaps. To prevent the Swiss franc from further appreciating against the euro, we purchased foreign currency on the foreign exchange market; we also purchased bonds issued by private sector issuers to foster a decline in capital market risk premia. All in all, these operations achieved their objective. The situation is gradually normalising, although it remains very vulnerable. The risks are still clearly skewed to the downside and are major. Given these conditions, and in view of the inflation forecast, we consider that the time for a correction has not yet come, but that an additional relaxation of monetary conditions is not necessary either.