is also feared that an active use of central banks ’ balance sheets would blur the boundaries between monetary and fiscal policies. the new challenges to central bank independence arise as a consequence of prolonged monetary policy accommodation : at the current juncture central banks could be unduly constrained in their choices about the timing and pace of policy normalization by pressure arising both from financial markets that have become overly dependent on their support and from unrealistic expectations about what central banks can deliver. on these issues, the jury is still out. more in general, the crisis has raised the question of whether central banks should revise their objectives or strategies. in my view there is no need to question the current objectives of monetary policy ; in the case of the eurosystem, that of preserving ( medium term ) price stability. i do not believe that there is a particular need for financial stability to become an explicit objective of monetary policy on a par with price stability. indeed, the benefits of our monetary framework have become more, not less, evident during the crisis, with inflation expectations remaining well - anchored throughout. also, assigning financial stability as an explicit additional objective to monetary policy could risk blurring responsibilities and creating potential conflicts. however, i believe that there is no question that preserving financial stability is a crucial albeit not exclusive responsibility of central banks. indeed, the crisis has not put into question the idea that over longer horizons there is no trade - off between price stability and financial stability objectives – rather, there are synergies. °°° the crisis has thus rekindled the long - standing debate on whether central banks should act pre - emptively against signs of financial instability that can morph into systemic risks. a broad consensus has indeed emerged on the idea that macro - prudential policies should be adopted to limit these risks. these policies would address both the cross - sectional dimension of the financial system, with the aim of strengthening its resilience to adverse real or financial shocks, and its temporal dimension, to contain the accumulation of risk over the business or financial cycle. furthermore, countercyclical macro - prudential policies moderating the financial cycle would support monetary policy in the stabilisation of the economy and, by adding a systemic perspective, they would complement micro - prudential policies directed at preserving the stability of individual financial intermediaries. however, a potential for conflicts, or what economists usually refer to as tradeoffs, may arise between monetary, macro - and micro - pr

included an analytical framework developed by mr. jeffrey fuhrer from the boston fed, one of today ’ s paper presenters, to assess inflation dynamics with a special focus on the role of survey - based expectations. 2 i am sure that we have learned a lot about inflation expectations in the past few years, but there still remain many research questions on this issue yet to be addressed. for example, there seems to be a consensus that inflation expectations exhibit a certain degree of inertia or persistence, which is difficult to be explained in a full information rational expectations ( fire ) framework even with the classic assumption of nominal ( price ) rigidity. however, little consensus has been formed regarding the micro - foundations for such seemingly persistent inflation expectations dynamics. against this backdrop, recent studies have increasingly focused on information rigidity, and i would like to encourage researchers to move on further along with this research agenda. 1 / 3 bis central bankers'speeches b. the natural rate of interest the second item on our research agenda is an old and new topic, that is, the natural rate of interest, or, in slightly more technical parlance, the equilibrium real interest rate. the natural rate of interest has long been discussed in macroeconomics and related time series analyses. if we say “ our monetary policy stance remains accommodative, ” this means that actual real interest rates are kept at a level below the equilibrium real interest rate. this quite naturally gives rise to the question that how we can know the level of the equilibrium real interest rate. this question is more difficult than it appears. the natural rate of interest would have a clear interpretation in a solid dynamic general equilibrium model. nevertheless, the determinants of the natural rate of interest vary, depending on how the model is specified. it is well known that, in some specific cases, the natural rate of interest coincides with the potential growth rate of the economy, but this is not always the case. further, when trying to estimate the natural rate of interest, econometricians face a long list of technical challenges. for example, data on the riskfree interest rate with a fixed maturity are not readily available, since there is no absolutely “ riskfree ” asset in actual financial markets. also, consumers ’ time preferences are hard to estimate, and, moreover, whose time preference we should estimate still remains an unresolved question. with the difficulties just mentioned in mind, central bankers have long made careful policy decisions using some kinds of estimates of