The 74th Annual Report of the Bank for International Settlements for the financial year which began on 1 April 2003 and ended on 31 March 2004 was submitted to the Bank's Annual General Meeting held in Basel on 28 June 2004.
Introduction: time to rebalance?
In the wake of the economic slowdown that began in early 2001, there was an extended period of both disappointment and puzzlement that the unprecedented degree of monetary and fiscal stimulus applied was not having more evident success in rekindling global growth. Of particular concern to central bankers was the fact that some of the main channels of monetary stimulus appeared to be blocked by heightened risk aversion on the part of both markets and financial institutions. Subsequently, these dark clouds lifted as financial markets again found grounds for optimism, while continuing to be buoyed by extremely accommodative macroeconomic policies. Indeed, at 0%, 1% and 2% in Japan, the United States and the euro area respectively, policy rates in the major industrial economies were at or near postwar lows. Moreover, these forces for global expansion were augmented by another unprecedented development. In large part to prevent the appreciation of their currencies against the US dollar, several governments intervened massively in foreign exchange markets during the period under review. In addition, there was a general easing of financial conditions in many emerging markets.
The views expressed here do not necessarily reflect the views of the BIS member central banks.