Central banks have needed to find new ways to support a financial system under great stress and to buttress economic activity. Moreover, the crisis also revealed a major hole in our framework for managing the economic and credit cycles. So tonight I want to discuss some of the actions we have taken in dealing with the crisis and subsequent recession, as well as explaining some of the attendant reforms to the policy framework. Let me begin by rewinding the clock five years to August 2007 when financial markets first seized up. UK GDP had grown continuously and at a steady pace for the preceding 64 quarters. And consumer price inflation had been within a percentage point of the Government’s inflation target for every month bar one since the Bank was given operational responsibility for monetary policy in 1997. Such stability was historically unprecedented. But the United Kingdom was not unique: other advanced economies also experienced a long period of unusually benign macroeconomic outcomes. The period of unusual stability led households, businesses and especially financial institutions to underestimate the risks they were exposed to. Together with historically low interest rates, at both the short and long end of the yield curve, that encouraged a debt-fuelled “search for yield”. The associated expansion in credit is shown for this country in Chart 1.
These  BIS central bankers’ speeches  1  estimations conditioned the retaining of the stimulating nature of monetary policy during the second quarter of 2012. The key rate stood at the lowest historical level, providing eased monetary conditions in order to meet our inflation target and support the Albania’s economic activity. Also, the Bank of Albania has continued to inject sufficient liquidity demanded by the banking system, against an expanded collateral base and at adequate maturity terms. According to recent data from INSTAT, the Albanian economy recorded an annual fall of 0.2% in the first quarter of 2012. Industry contracted 19.3% y-o-y, mainly due to the significant decrease in electrical energy output. Also, Construction decreased its activity in real terms, by 17.6%, thus providing a negative contribution to the performance of the gross domestic product. By contrast, Services contributed positively to the economic activity, pointing to an annual growth of 6.0%. Agricultural sector grew 4.5%, y-o-y during this period, providing a positive contribution to the growth of the gross domestic product. Estimations on the aggregate demand in the first quarter of 2012 suggest a continuing weak domestic demand. The consolidated fiscal policy determined the lack of fiscal stimulus in this period and a downturn in public sector’s demand for goods and services. Private consumption remains slow, thus reflecting the prudent consumer’s behaviour and the increasing tendency for saving. Private investments also remained low.