for uk monetary policy is for it to be set at the right level to lay the foundations for a stable economy. in that regard, we should bear in mind that the economy will always be subject to unforeseen shocks which tend to push it away from stability for a period of time. the job of the mpc is to with such a large change in the nominal exchange rate, one only needs to be slightly out in estimating the marginal impact to generate large errors in the total impact. bis central bankers ’ speeches react to those shocks by bringing inflation back to target and, subject to that primary objective, in a manner which helps sustain output and employment. as well as inflation back around target, we have also seen a resurgence in growth over the past year. it was difficult to explain the suddenness of the change in sentiment which accompanied the recovery during 2013 but growth in itself should not be regarded as surprising. it is the near stagnation from 2010 – 12 which was harder to understand. we have been stimulating the economy with historically extreme levels of monetary policy for a long time and a variety of headwinds ( including the problems in the euro area, a tightening of credit conditions, the drag on activity from fiscal consolidation, and a squeeze in household real incomes resulting from the fall in productivity and higher energy and commodity prices ) have all contributed to limit the effect of that stimulus. what seems to have happened in 2013 is that at least some of those headwinds were perceived to have diminished, allowing the policy stimulus to come through and the resulting growth has generated the renewed consumer and business confidence which reinforces demand. we are very conscious that the headwinds have not gone away : much of europe and some other parts of the world continue to struggle for sustained growth ; fiscal consolidation in the uk ( and elsewhere ) is likely to continue for a while to come ; and the financial sector still needs some rebuilding. indeed, the official production and construction data released earlier this month were rather disappointing, reminding us that strong growth from here on is by no means guaranteed. but to varying degrees perhaps the very worst of the storms may be behind us. just a tailing off in some of their negative impacts may have been sufficient to allow the economy to start growing again. interest rates and forward guidance so why aren ’ t we moving to tighten policy straight away, why did we issue forward guidance around monetary policy? the answer is in the levels of output and employment, not their growth rates. after

interest rates. i would finally like to address one other key aspect of the framework according to which the ecb tries to pursue its objective. the recognition that monetary policy has to cope with an ever changing and imperfectly known world has been an essential consideration in the design of the ecb's monetary policy strategy. besides defining price stability, the governing council chose to equip itself with a broad but robust framework for analysing economic developments and shocks, which we call the two pillars of our of monetary policy strategy. in recognition of the fundamentally monetary origins of inflation, our strategy assigns a prominent role to money in the formulation of monetary policy. this so - called first pillar of the ecb's strategy implies the use of approaches and models in which monetary aggregates play an important role in analysing risks to price stability. in parallel, the second pillar ensures that other forms of analysis and models, such as the investigation of the interplay between supply and demand as well as cost - push dynamics, are incorporated into the analysis of price developments. also, the eurosystem staff projections regarding the economic outlook of the euro economy are analysed in the context of this pillar. together, the two pillars ensure a comprehensive assessment of the economic situation and allow a focus on the nature of the shocks hitting the euro area. conclusion ladies and gentlemen, i am coming to the end of my remarks here today. the introduction of the euro has been an outstanding achievement. in particular, the introduction of the euro banknotes and coins went much more smoothly than initially expected. the success of the whole undertaking shows that many of the critics who opposed the euro in the 1990s were indeed wrong. moreover, the success of the euro can be attributed to the sound economic and monetary framework laid down in the treaty on european union, which includes the tasks and functions of the ecb. i hope you will agree that the differences between the practices of major central banks oriented towards price stability are in fact relatively limited. all these central banks share a number of key elements that guide the conduct of monetary policy. however, the experience of central banks worldwide also shows that there is no single, unique way to successfully conduct monetary policy. perhaps it is no accident that the monetary authorities of the world's two largest currency areas – the federal reserve system and the eurosystem – have eschewed excessively simplified and rigid frameworks to conduct policy. they have consciously chosen to enlarge, rather than narrow, on