, ” canadian journal of economics 51, no. 1 ( february 2018 ) : 127 – 155 ; l. ferrara and p. guerin, “ what are the macroeconomic effects of high - frequency uncertainty shocks, ” journal of applied econometrics 33, no. 5 ( august 2018 ) : 662 – 679 ; r. sekkel and s. jo, “ macroeconomic uncertainty through the lens of professional forecasters, ” journal of business & economic statistics 37, no. 3 ( 2017 ) : 436 – 446. s. s. poloz, “ monetary policy as risk management ” ( speech to the canadian club of montreal, montreal, december 12, 2013 ). s. s. poloz, “ integrating uncertainty and monetary policy - making : a practitioner ’ s perspective, ” bank of canada staff discussion paper no. 2014 - 6 ( october 2014 ). - 6policy making. this does not mean rejecting the use of models in decision making. in fact, the bank ’ s various models provide the base case that serves as the starting point for governing council ’ s deliberations. they are also used to simulate alternative scenarios, which is an excellent means of reaching a fuller understanding of the risks we face. 9 the essence of risk management is identifying the most important risks and uncertainties around the outlook. we examine the probabilities that the risks will be realized, consider alternative futures related to uncertainties and think about the potential consequences of making a policy error. we then choose a policy course that weighs these risks and uncertainties in order to best manage them. this process can entail a degree of flexibility around the inflation target itself, allowing inflation to return to target more slowly or quickly than on average, while keeping in mind that our target sits within a control range of 1 – 3 percent. given all the uncertainties and risks, it does not make sense to think a single, optimal path for our policy interest rate will be consistent with achieving our inflation target. it makes no sense to try to engineer such a path with precision. instead, we recognize that for every base - case economic projection, a wide range of possible interest rate paths could ultimately be broadly consistent with the inflation target. we weigh the various risks associated with things we do not know and then take actions that are based on a nuanced balancing of those risks. 10 in doing so, we often use several smaller, specialized models to augment the input from our

##o : the measure was subject to data confirming the medium - term inflation outlook. what does this mean in practice? our baseline scenario is that the euro area expansion will continue in the period ahead. but new uncertainties have arisen in 2018. last year was exceptional, with euro area gdp growing by about 3 % in real terms between the first quarter of 2017 and the first quarter of 2018, with the combination of strong growth in domestic demand and a rebound in international trade. this year, international trade dynamics seem weaker. it may be attributable to a delayed impact of the appreciation of the euro since the beginning of 2017. temporary factors and supply - side tensions related to very high levels of capacity utilisation in some euro area countries also contributed to a moderation in economic growth in early 2018. in a nutshell, both demand and supply - side factors are at work, and our baseline scenario is surrounded by more uncertainty. so we must be prudent and carefully monitor economic developments. why? 1 / 4 bis central bankers'speeches the level of uncertainty has increased. protectionism, for example, is having an effect on business sentiment, which might already be holding back investment. it is still too early to tell. in addition, brexit will have financial implications for firms not only in the united kingdom, but at this stage no one knows what the final brexit conditions will be. are these uncertainties the reason for your prudence in the way the asset purchase programme is being concluded? our baseline scenario still holds, but we must monitor the risks. this is why we decided to express an anticipation about the evolution of our net asset purchases. by doing so we are keeping what we call optionality. ultimately, if risks materialise, could one of the options be a further extension of the programme into 2019? as our president, mario draghi, said last week, the asset purchase programme is now an integral part of our “ toolbox ". it is definitely an option, but, last week, we announced our anticipation of the end of net asset purchases, which reflects our confidence that inflation is on course to reach levels below, but close to, 2 % over the medium term. well, are you being vigilant? we are alert to the tail risks that may, for example, stem from protectionism and, potentially, from an associated sharp fall in confidence. might another option be to increase the monthly pace of purchases for the last three months