2/8  BIS - Central bankers' speeches  Meanwhile, the high levels of government debt following the pandemic, alongside the tightening of financial conditions, represent a vulnerability and limit the space to adopt fiscal expansion measures. This setting is also subject to an extremely high level of uncertainty, stemming, above all, from the course of the war in Ukraine and its economic repercussions, which are hard to predict. However, inflationary pressures also pose a genuine risk. Whether they increase further depends not only on the course of the war, but also on internal factors, such as a possible persistent rise in inflation expectations, or higher-thanexpected increases in wages or mark-ups. More persistent inflation would require a sharper tightening of monetary policy, which would render those public or private agents in a less sound economic and financial position more vulnerable. This could have a greater-than-expected impact on their spending levels. 1. The economic policy response Against this backdrop, I would like to share my opinion on how economic policy should respond. First, I would like to underscore that the current situation is far different from that triggered by the pandemic. We then faced a temporary but highly adverse shock, in a setting free of inflationary pressures. That environment warranted a forceful monetary policy response, in order to create conditions that were conducive to an equally extraordinary fiscal expansion which would guarantee the income of households and firms and thus minimise the crisis-induced structural damage to employment, productive capacity and growth.
The current level of security is not adequate for large-value payments. Some Internet-based payment products are becoming more secure, but only after the creators of these products have spent a great deal of time, effort and resources making their products secure. Consistent fast transmission and processing are also essential for large-value payments. The Internet today has no authorized, universal means of prioritizing specific electronic messages from other messages. Faster and better hardware helps, certainly, but offers no guarantee. One of my responsibilities is to serve as the Product Director of the Wholesale Payments Product Office of the twelve Federal Reserve Banks. This includes the Fedwire transfer of funds, transfers of securities against payment, and net settlement. In providing these payment services, the Reserve Banks must charge a fee designed to cover their costs, plus what we refer to as a “private sector adjustment factor,” a proxy for the capital, taxes, and other costs incurred by private-sector service providers. Thus, I am keenly interested in the next stage of the Internet. If messages sent across the Internet could be made timely, become much more secure at reasonable cost, and, if a widely-accepted prioritization scheme for electronic messages BIS Review 17/1997  -7-  could be implemented so that large-value payment messages could move instantaneously, it is not inconceivable that the effect on existing large-value payments transfer systems could be substantial.