better able to judge the extent to which the committee's rationale is reasonable and persuasive. the projections also function as a plan for policy – albeit as a rough and highly provisional one. as i mentioned earlier, fomc participants will continue to base their projections on the assumption of " appropriate " monetary policy. consequently, the extended projections will provide a sense of the economic trajectory that committee participants see as best fulfilling the federal reserve's dual mandate, given the initial conditions and the constraints posed by the structure of the economy. to illustrate, consider the question of the length of time over which a central bank should aim to restore price stability following an unwanted increase in inflation. a central bank that places weight on both employment and price stability, like the federal reserve, would not attempt to disinflate immediately or establish a fixed time frame for the restoration of price stability. rather, the optimal expected time required for completing the disinflation would depend on a host of factors, including the size of the initial deviation from price stability, the initial state of the real economy ( for example, the level of unemployment ), whether the rise in inflation resulted from transitory or more persistent sources, the extent to which inflation expectations are well anchored, and so on. in circumstances in which disinflationary policy is necessary, the extended economic projections would make clear that the federal reserve is committed to maintaining price stability, but they would also provide some indications about what the committee views as the most appropriate pace of disinflation, given the state of the economy and the requirements of the dual mandate. in like fashion, the speed at which policy aims to return the economy to its sustainable rates of growth and employment following a period of resource slack should depend in part on the nature and extent of inflation risks, among other considerations. more generally, the extended projections will convey additional information about the committee's policy strategies and thus help augment the committee's transparency, predictability, and accountability. finally, the extended projections will embody information about fomc participants'evaluations of certain long - run features of the economy, evaluations determined both by the economy's structure and by the committee's policy objectives. because of the extension of the projection horizon to three years, participants'inflation projections will convey more information regarding their views about the measured rate of inflation that, in the long run, is the historical data we will provide on forecast errors will starkly illustrate this

ewald nowotny : central banking after the crisis – responsibilities, strategies, instruments opening remarks by mr ewald nowotny, governor of the austrian national bank, at the 38th economics conference of the austrian national bank, vienna, 31 may 2010. * * * dear chancellor faymann, dear president trichet, ladies and gentlemen, it is my pleasure to welcome you to this year ’ s economics conference on behalf of the oesterreichische nationalbank. we are especially grateful that chancellor faymann and president trichet are here with us this morning. let me also use this occasion to publicly thank the austrian government under chancellor faymann and vice chancellor and finance minister proll for the excellent and respectful cooperation between the austrian government and the austrian central bank in these very challenging times. i would also like to use this occasion, president trichet, to express my full admiration and trust in your leadership of the ecb during the years of crisis and especially also over the past few weeks. we all had to navigate, as you always say, in unchartered waters – and it was extremely important in this situation to have such an experienced captain in command. my own life experience has taught me that we should never underestimate the human factor, also in big policy issues. thus, it is essential for the ecb to have a president who, due to his experience and life - long achievements, is able to communicate convincingly that the ecb is and remains fiercely independent and inflexibly attached to its primary mandate, price stability. we are proud indeed that price stability has been fully maintained in the euro area since the inception of the euro more than 11 years ago. ladies and gentlemen, this year ’ s economics conference is entitled “ central banking after the crisis : responsibilities, strategies, instruments ”. the term “ after the crisis ” seems somewhat premature and obviously needs some clarification. it refers to the specific role of central banks and the lessons to be learned from the experience of the past three years. but we have to keep in mind that crises follow a typical sequencing, as professors reinhardt and rogoff have shown ( again ) recently : a banking crisis tends to evolve into a general crisis of the financial sector, which may then trigger a crisis of the real sector of the economy via financing channels and wealth effects. and this, in turn, may lead to a crisis of public finances via automatic stabilizer effects and additional measures. the big challenge is to prevent