##ism. pragmatism 1 / 4 bis - central bankers'speeches in light of our limited knowledge about the economy and the influence of monetary policy, decision - makers are well advised to be pragmatic. they should choose policies that exhibit a certain degree of robustness to different circumstances. rather than seeking measures that are optimal in the context of specific situations, decision - makers are better off adopting less ambitious policies that produce reasonably good results in a sufficiently large variety of scenarios. in analysing such scenarios, we work with models that incorporate a relatively small set of key relationships. these relationships provide useful approximations of the economy's dynamics and the transmission of monetary policy. however, not everything can be captured in mathematical equations or measured with the available data. furthermore, our assumptions about the behaviour of market participants are drawn from the past, which is often only roughly comparable to a given situation in the present. policymakers must therefore also look beyond models and form broader – less formal – hypotheses about how the economy and the monetary transmission mechanism function. model simulations and forecasting must have a prominent place in our decision - making process – not least given the lag in monetary policy's impact on the economy. however, risk assessments and cost - benefit analyses should also involve judgements based on less precisely measurable evidence that cannot be directly incorporated into models. the snb takes such a pragmatic approach to decision - making. our policies do not follow a strict rule designed to be optimal with respect to a single model of the economy. our main inflation forecast is based on a suite of models, as well as judgmental adjustments drawing on a variety of outside information not captured in the models. such outside information includes monetary indicators and discussions with company managers. furthermore, our monetary policy decisions are not based exclusively on our inflation forecast. our forecast is always complemented by a careful risk assessment and comprehensive cost - benefit analysis by the governing board. the snb's pragmatic approach to decision - making allows us to respond quickly and flexibly to different kinds of shocks. however, it is important to note that pragmatism is not synonymous with unbounded discretion and a lack of discipline in policy - making. this brings me to the second principle : consistency. consistency while decision - making should be pragmatic, it should be consistent over time. policy decisions must be based on a firm commitment to the objective of price stability. they cannot be based on a period

ensure the consistency, credibility, legal certainty and political legitimacy of the eu framework for financial stability. it is vital that the overall effectiveness and efficiency of the eu institutional arrangements are not endangered and that no concerns arise from a financial stability perspective. therefore, the ecb favours an evolutionary, rather than a revolutionary, approach to the further development of the eu framework for banking supervision. nevertheless, if the existing arrangements prove in practice to be insufficiently effective in addressing the challenges associated with the changing financial landscape, consideration should be given to new ideas that would help us to develop the eu supervisory framework further. 2 / 2