HICP inflation excluding energy, which is a measure of the underlying inflation rate, was 1.0 per cent in July. In the euro area, too, the underlying inflation rate measured in this way has been relatively stable in recent years and declined considerably less than HICP inflation over the past year (see Figure 10). Rest of the world We are forecasting better growth for emerging markets and developing countries outside of the OECD than for the OECD countries. This view is supported by the IMF's most recent update to its World Economic Outlook. The IMF writes that the global economy is beginning to pull out of the recession, but that the stabilisation is uneven between different regions and that the recovery will be sluggish. The IMF, for example, is forecasting strong growth in China and India both this year and next year (see Figure 11). However, the economies in Russia and Brazil are expected to shrink this year and then grow again next year. 4  3  Monetary Policy Report to the Congress, July 21, 2009, Board of Governors of the Federal Reserve System. 4  See the World Economic Outlook update, 8 July, 2009, IMF, http://www.imf.org/external/pubs/ft/weo/2009/update/02/pdf/0709.pdf. BIS Review 98/2009  3  The OECD’s leading economic indicators for June paint a slightly brighter picture and indicate that economic developments have shown a turnaround during the first half of this year in all of the “BRIC” countries: Brazil, Russia, India and China.
Government securities are used by central banks as collateral in managing market liquidity and implementing monetary policy through money market operations. Furthermore, given their low risks, they are used by banks and pension funds as investment instruments. These aspects need to be borne in mind when designing prudential treatment of banks’ sovereign exposures. This is particularly true of emerging and developing countries, as their financial markets are shallow and low-risk equivalents to government securities and central bank papers are hard to find. As I have already mentioned at the beginning of my speech, the CNB hosted the BCG workshop on the impacts of Basel III implementation on emerging markets and smaller economies three years ago. The workshop was efficient and successful, resulting in a memo highlighting the effects of the reforms on these economies for the BCBS and supervisors. I am happy that we are meeting here again to discuss regulation of sovereign exposures and other topical issues related to Basel III regulatory reform. I hope that this workshop will reach similar success. Ladies and gentlemen, thank you and I wish you success in your work. 2/2  BIS central bankers' speeches