I have said that the banking business is undergoing a rapid new technology-caused transformation as we see the emergence of new areas in the banking business. Therefore, undoubtedly, both the regulator and the bank community need to be abreast of all recent trends and best business practices. This is the reason we have decided to launch an establishment that would be akin to a corporate university. This facility will operate on a permanent Bank of Russia-based platform, inviting global and Russian industry leaders to enable opinion exchange on development trends. My hope is that the bank community will assist us in developing the agenda for this platform. Given that I have presented today a fairy large volume of innovations in banking regulation, we decided to cover the other financial sectors separately in tomorrow’s session. Today, let me only guide you through our key priorities. One, advancement of the bond programme. Two, generation of long money sources through retirement savings and life insurance. Three, improvement of corporate governance, which is essential in capital market development. Four, efforts to better quality of financial consumer protection, a field with a lot of room for improvement, as well as improvement of interaction with us as a regulator, including through the Bank of Russia online reception. On a separate subject, let me note the need to counter unfair practices in the financial market, the drive to strengthen managerial responsibility in the industry and tighten business reputation requirements.
Interest rates must be raised before overly large imbalances accumulate. The motive would be to reduce the risk of a recession and low inflation during the period following a fall in asset prices. If the central bank is successful, it is not possible to demonstrate afterwards that one has been right. A further argument is that it is difficult to determine what change in the interest rate is required to achieve the desired objective. However, the advocates of the more ambitious strategy, where monetary policy more explicitly takes asset prices into account, claim that although it is difficult to judge whether a bubble is involved, this is not more difficult than estimating potential growth, for instance. If one extends the target horizon, the inflation target may in itself motivate tightening monetary policy, despite the fact that this would mean that inflation fell below the target level for a period of time. Based on purely theoretical reasoning, the target horizon is the entire future. The problem is that forecasts become more uncertain the further ahead they look. Many central banks with a strict inflation target policy therefore talk as though the forecast and target horizon were the same. It is difficult to take a clear stand in favour of one of the strategies. None of the arguments can be dismissed. As always, this proves that monetary policy is more of an art than a science.