04 February 2020

BIS: Jens Weidman: Change and continuity

The price stability is the primary objective of monetary policy. The ECB’s Governing Council must not only review its strategy. There is also need to think about how to successfully exit loose monetary policy. The increasing blurring of monetary and fiscal policy, growing risks for financial stability and a general “getting accustomed” to cheap money mean that monetary policy normalisation is becoming an ever greater challenge.

Looking to the future and the willingness to modernise are important not only for monetary policy, they are also crucial for the financial markets. Back in the 18th century, Frankfurt evolved into a financial centre of international renown – thanks to the newly established trade in government bonds. However, Frankfurt bankers long wanted nothing to do with shares, which resulted in Frankfurt being eclipsed by Berlin in the 19th century.

Nowadays, there are opportunities, for instance, in financing the greening of the economy. And in terms of technology, too, Deutsche Börse has its finger on the pulse of the era. Blockchain, in particular, promises to improve the settlement of financial transactions.

Deutsche Börse and the Bundesbank have jointly developed and tested a prototype for securities settlement, which has proved suited for this purpose. However, the research project also demonstrates that a new technology does not always trump the existing systems, as decentralised technology is, in principle, somewhat slower and more expensive, yet provides other advantages. In other words, its use requires an exact cost-benefit analysis.  

For monetary policy, the European treaties set a clear governance framework. At its heart are the people and the promise made to them – the promise to maintain price stability within the euro area.

Full speech on BIS

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