In recognition of the crucial role that CLS serves in the foreign exchange market, CLS was designated as a systemically important financial market utility by the U.S. Financial Stability Oversight Council on July 18, 2012. In my words, we can’t imagine the foreign exchange market without CLS. Let me turn to the future and what it holds for CLS and for us. As is true for all us, the path of the future is determined in part by the momentum of our history and in part by the unknowable that lies ahead. Let me talk to the history. First, it seems clear that CLS has much more runway ahead in furthering its core mission – the reduction of FX settlement risk – by expanding its settlement service to include additional currencies and settlement sessions, and to increase participation in the system. •  Today, CLS settles 17 currencies. But there are many more currencies to go, some in regions that are just coming fully onstream in the global financial system. 2  BIS central bankers’ speeches  •  Today, “same day” foreign exchange activity is not settled in CLS. Can CLS find solutions to help reduce settlement risk in this segment of the market? •  Today, CLS has one discrete settlement session that occurs at a defined time during the day. Is it feasible to imagine a world where CLS is truly Continuous in Linking Settlements on a payment-versus-payment basis at most, if not all times during the global business day?
Unemployment is unlikely to rise much more, and the production gap should gradually disappear in the course of the coming year. I shall now describe the development of inflation over the past few months and explain our new inflation forecast in more detail. The dotted green curve in the graph shows our inflation forecast of December 2001. At that time, we assumed that the three-month Libor rate would remain stable at 1.75% and accordingly expected a slight general rise in inflation to approximately 1.5% by the end of 2004. The fluctuations in inflation predicted for 2002 reflect basis effects. Last December's forecast was based on the assumption that the US economy and the European economy would stagnate until mid-2002 and would then gradually return to their potential growth path. Our forecast of December 2001 slightly overestimated the development of inflation for the first quarter 2002 and at the same time slightly underestimated inflation for the second quarter 2002. The deviation from the forecasting path is due mainly to the development of oil prices and the changed time of collecting data on clearance sales prices for clothing and shoes. Year-on-year inflation, as measured by the national consumer price index, rose to 0.6% in the first quarter 2002 from 0.4% in the fourth quarter 2001. In April, inflation increased to 1.1%, while declining again in May to 0.6%. The distinct rise in April was largely due to yet again higher oil prices and higher prices for clothing and shoes.