Likewise, a  4  Winje, H. and L.T. Turtveit (2014): “Norwegian banks’ adjustment to higher capital requirements”, Norges Bank Staff Memo 14/2014. BIS central bankers’ speeches  3  pronounced economic downturn with increased bank losses can be addressed by lowering both the key policy rate and the capital buffer. In other situations, it may be appropriate to reduce the key policy rate while at the same time raising the level of the capital buffer. If, for instance, there are prospects that inflation will become too low at the same time as debt and house prices are rising rapidly, the key policy rate will be reduced, in line with its primary task of maintaining a nominal anchor for the economy. Unwarranted negative effects on financial stability of lower interest rates could in this case be counteracted by raising the level of the countercyclical buffer. Macroprudential policy and stricter banking regulation help to reduce systemic risk, but we cannot act on the assumption that tighter regulation alone will suffice to prevent future crises. Monetary policy, on the other hand, has well-documented effects on house prices and debt. Thus, monetary policy deliberations at Norges Bank give weight to mitigating the risk of a build-up of financial imbalances. By taking financial stability considerations into account, we seek better, more stable outcomes for inflation and output in the longer run. A simple analytical framework can serve to illustrate this point. Chart: Framework Consider a central bank with a flexible inflation targeting regime.
Weak growth in Switzerland, however, may be explained mainly by the conspicuous productivity gap between the innovative export sector and the domestic sector set in its traditional structures. The reason for this lethargy of the domestic sector is a dense network of regulations which limit competition and obstruct technical progress. The result is an excessively high domestic price level from which not only consumers but also exporters suffer. Growth-promoting measures must therefore aim primarily at wedging impediments to competition in the domestic sector. BIS Review 49/2003  1