This has permitted the creation of today’s globalized financial industry and has made possible an impressive growth in value. The role of central bank oversight Now, let me turn to the role of central bank oversight: Every transaction - be it a commodity or a service - eventually leads to a transfer of money. From trade to settlement at least one system of the financial market infrastructure is usually involved. Given this, it is not surprising that the regulators are keeping a keen eye on market developments. Central banks, with their core mandate of monetary policy, have an especially close relationship with the payment systems. To the overseers of payment systems the main objective is safety. The definition and standards of safety have evolved with the years. For a long time the main interest of central banks in payment systems came from computer experts. Payment systems used to be viewed merely as ‘computers’ that cleared and settled payment obligations. In the late 1980s the focus started to shift towards the financial risks, i.e. credit and liquidity risk inherent in payment systems. Slowly it became common knowledge that payment systems could be a source of systemic risk by providing a channel through which the failure of one participant to meet its payment obligations could be passed on to other participants. In their own best interest and under the influence of the overseers operators started to protect their systems against financial risks - in most cases by building Real-Time Gross Settlement systems (RTGS).
Neither can we rule out an intensification of the recent global trends and a stronger than expected impulse from abroad, by either a steeper recovery of world activity and/or better commodity prices. Some of this seems to have permeated financial markets, where the prices of riskier assets have risen. Although it is still premature to validate such optimism, it is clear that the markets are in a better mood than last year, including local markets, which have even been outperforming many of their peers. On the domestic front, after several years of subdued growth, we cannot rule out that a more persistent phenomenon may be affecting the economy’s ability to grow, in which case spending plans of both public and private agents would need some revision. One area calling for special attention is the labor market. While acknowledging that it has gradually adjusted without significantly increasing unemployment in the past several years, it is possible that, after years of low growth companies wish to make more drastic changes in their payrolls, particularly if the expected growth recovery towards the end of the year stalls. In contrast, in a context where no macroeconomic imbalances are hindering growth, a scenario where an improved external outlook consolidates, plus the end of a cycle of mining investment adjustments and a rebound in sentiment, could lead to a more dynamic recovery than expected. All considered, the Board believes that the risk balance for both inflation and activity is unbiased. Summing up, inflation has evolved in line with December forecasts.