Ravi Menon: The rise of Asian banking Speech by Mr Ravi Menon, Managing Director of the Monetary Authority of Singapore, at the Symposium on Asian Banking and Finance, jointly organised by the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore, Singapore, 29 May 2017. * * * Dr John Williams, President and CEO, Federal Reserve Bank of San Francisco, Distinguished guests, colleagues, ladies and gentlemen, good morning. Welcome to Singapore once again for this year’s Symposium on Asian Banking and Finance, jointly organised by the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore. Let me say what a delight it has been for us at the MAS working with John and his colleagues at the San Francisco Fed, putting together this event. 2017 marks the tenth anniversary of the Symposium. It is also the third year that MAS is partnering the San Francisco Fed to host the event. This Symposium has been providing a high-quality platform for policy-makers, industry captains, and academics to exchange views on global finance. It stands out from other conferences for its focus on bringing Asian voices to the discussions. We at the MAS have a soft spot for this event, as it represents a milestone in our long-standing relationship with the San Francisco Fed – a relationship that dates back to the time current Fed Chair Janet Yellen was at the helm, before she handed over to John.
This forces the Riksbank systematically to consider whether there are any transitory factors that ought to be disregarded when deciding the repo rate. It also facilitates a correct evaluation of monetary policy. One risk with this arrangement is perhaps that the discussion may sometimes become rather technical and focused on details. Should or should not the index we use include a given tax change that alters inflation by one tenth of a percentage point? Continuous minor revisions of our target variable are also liable to make us less intelligible, which may ultimately render monetary policy more difficult to scrutinise. So we evidently face a difficult choice. Since the clarification, we have chosen so far to start from UND1X, which unlike the CPI excludes house mortgage interest expenditure and price effects of indirect taxes and subsidies. In addition, we present a more detailed picture of how we view certain price movements that could be regarded as transitory, for instance the recent oil price rise. There are those who argue that the Riksbank ought to disregard downward price effects from structural factors. Examples are effects on the price level from various deregulations and the increasingly strong international competition. Reasons for doing so are difficult to find. What matters is not whether a price movement is “structural” but whether it affects the path of inflation more fundamentally, that is, as a part of the inflation process. If it does, it ought to be taken into account when policy is formulated, regardless of whether its effect is downwards or upwards.