Speech

Camdessus Central Banking Lecture Series—Inaugural Lecture, Opening Remarks by Christine Lagarde, Managing Director, International Monetary Fund

July 2, 2014

As prepared for delivery

Webcast

I would like welcome you all to our inauguration of the Camdessus Central Banking Lecture Series, which will become an annual event. It is a tremendous privilege to open this lecture in the presence of the person to whom this series is dedicated—former Managing Director Michel Camdessus.

It is also a momentous occasion to welcome here at the IMF the Chair of the U.S. Federal Reserve, the distinguished Janet Yellen.

And we have with us today many distinguished guests, to whom I also extend a warm welcome.

This lecture is at the heart of what we do. The Fund has a core mandate in overseeing the global financial system. Over the years, that mandate has evolved with changing global conditions—and it continues to evolve.

That is why we initiated this Lecture Series: first, to reflect on the recent crisis period—what we have learned; and second, to build stronger bridges among those preoccupied with central banking.

Reflecting on the recent crisis period

Let me start with why we need to reflect on the recent crisis period—and take stock of lessons learned.

The crisis was like an earthquake. It shook the financial system and swayed many of our assumptions and traditional policy prescriptions. It opened crevices, raised mountains, and diverted streams in the central banking and monetary policy landscape—formerly flat and bland, usually with relatively small blips of 25 basis point changes in interest rates up or down, spaced out at regular intervals!

On this new terrain, central bankers are quickly learning to be mountaineers, and have been busily developing new ideas and new tools for this more challenging terrain.

Central banking has suddenly become an exciting sport! So much so as to attract an avid global audience—although perhaps not as many as in Brazil at the moment.

Nonetheless, Janet, you may not be surprised to know that when you give your press conferences a group of passionate staff here at the IMF get together to watch you live on screen. I am told they even bring pop corn to the meetings! Such is the keen level of interest today—and certainly not just at the IMF.

Monetary policy and central banking have come to the forefront of the policy landscape because of the role they have played in fighting this crisis and returning us to stability. And because of the role they will continue to play. Let’s face it: we will not return to the pre-crisis world. The new normal will be different.

The Fund’s global membership of 188 countries recognizes this. Their questions on monetary policy and central banking are more frequent and increasingly complex. We need to provide answers—and offer directions on paths yet un-trodden.

Building stronger bridges

This brings me to the second objective of this Lecture Series—the need to build stronger bridges between all those with a stake in the important issues of central banking.

We need to re-examine, refine and modernize our policy advice on monetary policy and central banking. Yet this is a task that is too large for any single institution to undertake. We at the IMF recognize that much of the expertise and knowledge on these issues resides outside these walls—in the field, on the ground, in the board rooms of central banks.

Certainly, we can bring our cross-country perspective to bear, our experience in collaborative international efforts, and our expertise in looking at the big picture of economic policy.

At the same time, our goal is to join hands with central banks, academics and policymakers—to think together, explore together, compare notes and to move forward together. To build stronger bridges with each other.

This Camdessus Lecture Series is intended to be a pillar on which these bridges will rest—by creating space for these avid ‘fans’ of monetary policy, where they can engage and exchange views. A meeting that would bring us closer together year after year.

Thinking about the future of monetary policy

Before I leave you to the wisdom of our speakers, allow to me to highlight three of the main questions that we hope to address along with you in the period ahead.

First, the crisis was a stark reminder that price stability is not always sufficient for greater economic stability. So, should central banks have a financial stability objective?

Second, with increasingly complex financial interconnections, many small open and emerging market economies have found it challenging to deal with large swings in capital flows, asset prices and exchange rates. How can these economies retain monetary policy independence in such a policy setting? And what tools should they use?

Finally, the crisis has galvanized a broad effort to reform the global regulatory framework. There has been progress on various aspects of this financial reform agenda—but much still remains to be done. How will financial regulation and the new structure of the financial system affect the functioning of monetary policy, domestically and abroad?

Again, working with all our partners, the Fund’s goal is to develop clearer and more concrete policy views on these questions in the months ahead. We can start today.