In this fast-changing environment, public policies should be agile and should help build innovation and growth • The success of the payment services directives (PSD1&2) has illustrated that the European legislation can accompany new trends and trigger innovation. With new settlement assets such as Global Stablecoins, the adaptation of existing regimes will have to fit into a larger regulatory framework, to be adopted at a global level. • Central banks need to have an in-depth understanding of innovation and souldn’t be afraid to “learn by doing”. The Banque de France is now engaging with the innovators from the private sector to conduct a program of 8 experiments, with a view to integrating a wholesale CBDC into innovative procedures for exchanging and settling tokenized financial assets. The expansion of the BIS Innovation Hub with the establishment, in Paris and Frankfurt, of the Eurosystem Centre will definitely accelerate the collaboration among central banks in innovative financial technologies. • We, the ECB and the Eurosysteme, may decide to issue a money in digital form. Let me be clear: we cannot allow ourselves to lag behind on CBDC. That may mean that we create if necessary a retail CBDC, in order to ensure the accessibility of central bank money for the general public, in particular in countries where the use of cash in payments is declining. And/or it may mean that we Europeans may decide to issue a wholesale CBDC, with the aim of improving the functioning of financial markets and institutions.
Real interest rates for long maturities have therefore registered an increase. This is a new development because up until now, long-term interest rates had not clearly reacted to the progressive increase in the Libor. This will reinforce our efforts to tighten monetary conditions, since economic activity reacts more noticeably to long-term interest rates than to short-term ones. By contrast, in foreign exchange markets, movements in the Swiss franc have resulted in a relaxation of monetary conditions. As of the beginning of 2006, the Swiss franc started losing ground steadily visà-vis the euro. However, it firmed slightly against the dollar during the same period. Since our March assessment, the actual depreciation of the Swiss franc, i.e. weighted in terms of exports , amounts to 1.7%. The corresponding relaxation in monetary conditions is weakening the effects of our policy of lifting interest rates and is increasing inflationary pressure through two channels. One the one hand, it is bringing about an increase in import prices, which could have an effect on consumer prices. Even though the impact of this channel may have diminished during the past few years due to increased competition, there is no guarantee that – against the current backdrop of near full employment – it will not again be reactivated. On the other hand, it is strengthening the competitive position of our economy, thereby giving exports and economic activity a boost. As a consequence, the weak franc could heighten inflationary pressure in an economy already running at full steam.