Yves Mersch: Behaving responsibly in a low interest rate environment - a central banker's perspective Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Stiftung Marktwirtschaft: Expertentagung "5th Kadener Gespräch", Alveslohe, 10 February 2017. * * * The policy of the European Central Bank (ECB) is often said to be at the root of the current problems in the banking and financial sector. Particularly in Germany, there’s the added accusation of monetary policy “expropriating” savers. A closer look quickly reveals that such hasty judgements fail to appreciate the complexity of the matter. Today, therefore, I shall examine carefully the underlying reasons for our monetary policy action. By focusing on the reasons for our actions we can understand more easily how to get back to a normalisation of monetary policy. Low natural interest rates Why are interest rates so low? The growth trend has been declining in many mature economies not just since the crisis, but for several decades. This slowdown in growth has led to lower long-term interest rates. The structural causes of this trend of slowing growth is a subject of controversy among specialists. Demographic and technological developments are mentioned, as are the effects of the financial cycle, which may be out of sync with the business cycles. I do not want to pre-empt this ongoing discussion.
This conference series is also a good way to organise informed discussions on the Mainland's financial sector issues. The first part of the conference examines the experiences of Chile, India, Korea and Thailand in their capital account liberalisation, with the view of drawing useful lessons for Mainland China. The second part focuses on the Mainland, assessing the effectiveness of current policies in dampening the impact of capital inflows on the domestic economy, their costs, as well as policy options of outward investment. A final paper will gauge the current level of financial integration between the Mainland and Hong Kong, and discuss the policy implications. I am pleased that this conference has brought together a group of experienced researchers and policymakers from a wide range of central banks, international organisations and research institutes. As earlier noted, the recent global financial turmoil will probably turn out to be the most critical time in recent economic history which will shape future economic and policy thinking. I hope this conference can provide a useful platform for fruitful discussions on capital account liberalisation to enhance our understanding on the issue. I wish the conference great success. BIS Review 141/2008  3