The impacts of various shocks on inflation may differ according to time and period. As a consequence, the period required for inflation to converge to the target again will be announced after the occurrence of shocks and the determination of their sources, if there is a significant deviation from the target. Forecast horizon The forecasts presented in the Inflation Reports published throughout 2006, covered a period of one and a half years. From 2007 onwards, forecasts will refer to a two-years period. This change aims to help economic agents to predict the future better. Furthermore, forming a comparable forecast period with the results of the Expectations Survey will provide us with the opportunity to analyze and assess inflation forecasts more easily. 1 Inflation forecasts and interest rate path While producing inflation forecasts, one of the most critical questions to be answered is how the monetary policy is shaped over the forecast horizon. Country experiences reveal that there are many different approaches related to the presentation of forecasts and the method of signaling future monetary policy. Accordingly, central banks can be classified into three groups: (i)  Countries in which central banks produce inflation forecasts by considering their own potential policy responses: New Zealand, Norway, Canada, Sweden, Czech Republic, Turkey, Columbia, Peru, Rumania. In addition, these countries announce their forecasts on the interest rate path in verbal or numerical terms. (ii)  Countries where central banks employ the market expectations: European Union (European Central Bank), Chile, Brazil, Czech Republic, Sweden, and England.

31.08.2019  The European economic policy response to a scenario of lower growth and inflation La Granda Summer Courses Pablo Hernández de Cos Governor  Distinguished rector, honourable mayor, academic authorities, dear students, ladies and gentlemen. Let me begin by extending my particular thanks to Professor Velarde for his kind invitation to participate in the closure of the 2019 La Granda summer courses. It is an honour for me to be here in this building, whose doors are open to all those interested in discussing and delving into the essential issues ever-present in these courses. Today I would like to share some thoughts with you on the complex economic outlook the European Union (EU) and, in particular, the countries comprising the euro area currently face. This is at a time when free trade, the bedrock of the European project and an essential source of the improvements in economic well-being in recent decades, is subject to continuous threats. I shall first describe the latest economic developments and the main challenges ahead. Then I shall analyse what, in my opinion, the economic policy responses to these challenges should be. The return of protectionism Only two years ago the global environment was a favourable one. It was marked by a synchronised expansion of the emerging and advanced economies, reflected in the highly robust world trade performance. But the international economic setting turned more unfavourable in 2018. This situation has run into 2019 to date, with a slowdown in growth (acutely so in manufacturing) and, in particular, in trade.