However, it is important to note that pragmatism is not synonymous with unbounded discretion and a lack of discipline in policy-making. This brings me to the second principle: consistency. Consistency While decision-making should be pragmatic, it should be consistent over time. Policy decisions must be based on a firm commitment to the objective of price stability. They cannot be based on a period-by-period optimisation of short-term gains in terms of output stabilisation or, more generally, on political opportunism. If we are to reach consistent decisions, we must make sure that all available information is used systematically. This is especially important during prolonged periods of largerthan-usual forecast errors. In such situations, additional data and information can help assess the likelihood that the forecast errors are not just due to unpredictable shocks, but to underlying structural changes in the economy. 2/4  BIS - Central bankers' speeches  The SNB is currently investing in such alternative data and information. This helps us to improve our understanding of inflationary pressures and assess the possibility of a change in the underlying inflation regime. For example, we are monitoring disaggregated CPI data more closely. We are also experimenting with machine-learning models that are trained using a large set of economic and alternative indicators. Furthermore, we collect additional data from our network of regional representatives who conduct one-on-one discussions about the current economic situation in Switzerland with around 250 company managers throughout the country every quarter.

These relationships provide useful approximations of the economy's dynamics and the transmission of monetary policy. However, not everything can be captured in mathematical equations or measured with the available data. Furthermore, our assumptions about the behaviour of market participants are drawn from the past, which is often only roughly comparable to a given situation in the present. Policymakers must therefore also look beyond models and form broader – less formal – hypotheses about how the economy and the monetary transmission mechanism function. Model simulations and forecasting must have a prominent place in our decision-making process – not least given the lag in monetary policy's impact on the economy. However, risk assessments and cost-benefit analyses should also involve judgements based on less precisely measurable evidence that cannot be directly incorporated into models. The SNB takes such a pragmatic approach to decision-making. Our policies do not follow a strict rule designed to be optimal with respect to a single model of the economy. Our main inflation forecast is based on a suite of models, as well as judgmental adjustments drawing on a variety of outside information not captured in the models. Such outside information includes monetary indicators and discussions with company managers. Furthermore, our monetary policy decisions are not based exclusively on our inflation forecast. Our forecast is always complemented by a careful risk assessment and comprehensive cost-benefit analysis by the Governing Board. The SNB's pragmatic approach to decision-making allows us to respond quickly and flexibly to different kinds of shocks.