“To excel in central banking, we need to have the courage to rush in like firefighters and we need to be as vigilant as policemen:Right now we are busy fighting a large fire that has spread across the world; and I would say we have been doing a good job in getting the fire under control.At the same time I can assure you that we have seen to it that money and lending market operations continue to run smoothly and that we promote the resumption of sustainable growth and preserve price stability,” the governor of the Oesterreichische Nationalbank (OeNB), Ewald Nowotny, said in his opening remarks to the 37th Economics Conference of the OeNB in Vienna on Thursday. The theme of this year’s conference, which is held at the Hotel Marriott in Vienna on May 14 and 15, 2009, is “Beyond the Crisis: Economic Policy in a New Macroeconomic Environment.”
Governor Nowotny emphasized that although the current crisis posed tremendous challenges to policymakers, there was a range of instruments available making it possible to counteract adverse developments.The right mix of expansionary monetary and fiscal policies was required to effectively tackle the economic slump.Central banks play a pivotal role in this process.
In his speech, Governor Nowotny explained the use of traditional and nonstandard monetary policy instruments in fighting the crisis and underlined the OeNB’s key function as a central bank in implementing the Eurosystem’s monetary policy and in crisis management at the national level.
Concerns about potential inflationary effects of the current monetary policy stance were unfounded, Nowotny said.Neither short-term inflation expectations nor forecasts of the degree of capital utilization in the real economy, neither credit growth nor monetary growth at present indicate inflation risks.These developments of course must be – and are being – monitored closely to be able to take action fast, if need be.“In the near term we see some signs that price levels might go down in individual euro area countries, which we interpret as an unwinding of increases seen last year in an environment of soaring energy prices.Let me stress, however, that over the medium term I see neither the risk of deflation, nor the risk of inflation,” Nowotny concluded.