area policymakers incur by consistently missing our inflation target come at our own peril. inaction – or weak action – in our fight against inflation would have backfired as it would have eroded the public ’ s confidence in our commitment to price stability. our timely response was key in keeping inflation expectations close to our target. nevertheless, current inflation rates in the euro area remain too high. most importantly, people clearly continue to feel the impact of inflation on their daily lives. 14 hence, today, the risk of overtightening seems dwarfed by the risk of doing too little. so, i think i may consider myself at least partly “ lamfalussyian ” when reaffirming the following : our monetary policy must continue to show its teeth until we see a credible convergence to our inflation target – a convergence that is also felt by the wider public. yet, to do justice to alexandre lamfalussy ’ s legacy, i should emphasize that he was also a man of caution, despite – or maybe because of – his avant - garde thinking in many areas. and this remark leads me to the third and last part of my lecture. looking ahead, i dwelled for some time on the question of how mr. lamfalussy, as a “ cautionary innovator, ” would have thought about the future of monetary policy in the euro area. where would he have seen the fault lines or pitfalls? which modern developments in our policymaking practice would he have considered problematic? when skimming his contributions, two revolving themes caught my attention. see lamfalussy, a. 1981. rules versus discretion : an essay on monetary policy in an inflationary environment. bis economic papers 3. april. 18. see ibid., p. 19. see ibid., p. 21. see ibid., pp. 47 – 49. holzmann, r. 2022. monetary policy in times of serial shocks. presentation for the narodowy bank polski academy on october 22, 2022. warsaw. see e. g. charalampakis, e., b. fagandini, l. henkel and c. osbat. 2022. the impact of the recent rise in inflation on lowincome households. ecb economic bulletin 7 / 2022. first, alexandre lamfalussy repeatedly warned against temptations to over - burden monetary policy. 15 although he recognized that navi

, and in excess of, the growth effects actually materializing. in this case, the temporary excess demand would spur inflation, and monetary policy should intervene in order to cool off demand to a pace consistent with the increase in the economy ’ s productive capacity. by contrast, if demand and supply effects from a new economy developed broadly in parallel, monetary policy could pursue a neutral stance. this does not mean that the central bank should keep nominal short - term interest rates constant. rather, it should see that overall monetary conditions, including the exchange rate and long - term interest rates, remain neutral. it also follows from what i said before, that monetary policy should not try to target a specific level of stock prices or to put a lid on stock prices. particularly in an era of a potential substantial regime change, it is impossible to judge with any confidence on the appropriate level of stock prices. monetary policy should, however, take into account the current - and potential future - aggregate demand effects arising from rising - and potentially falling - stock prices. concluding, ladies and gentlemen, let me finally observe that the factors behind the new economy applicable to the us could also have a similar positive effect on europe. as regards technology, as i already pointed out in my opening remarks, there is the chance for europe - based on the us experience - to achieve good results. a second argument consists in the benefits of the european integration into the global economy and the advantages of the common market - like deregulation in areas such as telecommunications and in the public utilities sector. finally, the establishment of the monetary union forces a restructuring in the corporate sector and facilitates new economic policies. all in all, the latter requires a much stricter approach on the european level to abandon rigidities in the labor, goods and services markets, to create a more favorable environment for entrepreneurship and to improve the structures and techniques of the risk capital markets. compared with the situation a few years ago, we are heading forward in these crucial areas. therefore, i am very much convinced that europe has also the potential for a new economy if we are willing to adopt the process of further structural reform. but there are many and good reasons for optimism. an important one is the well - functioning monetary union, which opens up many opportunities. thank you very much for your attention. references brainard, william ( 1966 ), uncertainty and the effectiveness of policy, american economic review, vol. lvii, no. 2, may. estrella, arturo,