great challenge lies ahead of them within this scope. they must be open about the risks run by each individual, as well as about the consequences of these risks, for running risks means suffering pain every now and again. the parties concerned might arrive at the conclusion that the decisions made were ill - advised. how is one to explain that the risk was deliberately taken and that the decisions made on the basis thereof were good, but that there is always a chance that things go wrong? in an unpredictable world, ex ante “ good ” decisions may prove “ wrong ” ex post, if the risk materialises. the very fact that pension funds take risks also obliges them to render an account for their policy, as such conduct will ensure the public ’ s confidence in the system. this also fits in with the demands made by today ’ s society on institutions. in short, for a system to be future - resistant all parties involved must be aware of the risks they run and the possible consequences thereof. transparency regarding the financial position of funds is a prerequisite to this end. freedom of choice this brings me to my second theme : freedom of choice. not only is it necessary for participants to know the risks they run, but for pension funds it is equally important to know what risks their participants are willing to run. when it comes to their pension provisions, the dutch turn out to be risk - averse and consider themselves financially incompetent. this emerged from a recent survey by de nederlandsche bank. the outcome of this survey is that the vast majority of dutch workers are not interested in a transition to a dc system. the majority value security and are willing to pay for that. this means that more freedom of choice must not be provided at the expense of pension security. more than that, for the truck system characterizing our present system a high degree of security is a prerequisite. people must be able to rely on a given minimum level of pension rights. above that level, they could be allowed more freedom of choice regarding the risks they run. what can pension funds do to accommodate these preferences and the diversity of risk profiles? by offering a lower, but guaranteed indexed pension, supplemented with an individual pension build - up based on a risk profile of the participant ’ s free choice. this does not imply that participants must be showered with thousand - and - one different options. in his book “ the paradox of choice : why more is less ”, barry schwartz explains that maximum

when there was no significant up - or downward trend in inflation. figure 1 euro area hicp inflation and its trend percent notes : the trend is estimated by an unobserved components model of hicp inflation and the unemployment rate for the euro area, see bonam et al. ( 2019 ). second, not only has inflation been subject to a downward trend, but also its inertia – or persistence – has increased since the crisis [ figure 2 ]. after having declined gradually between the mid - 1980s and the early 2000s, inflation persistence is now back at its long - term average. figure 2 euro area hicp inflation and its persistence percent notes : inflation persistence is estimated from a time - varying autoregressive model over a 30 - quarter moving window for seasonally adjusted, quarter - on - quarter euro area headline inflation. the graph shows hicp inflation ( in percent ) together with the inflation persistence parameter. the vertical bar shows the start of the gfc. for details, see bonam et al. ( 2019 ). the million dollar question is then what these developments signal for central banks ’ ability to control inflation. let me explain my take on this issue. notwithstanding the ongoing debate on its validity, i still regard the phillips curve as a relevant analytical framework to structure our thinking. according to the standard view, the phillips curve explains the inflation process in terms of three main elements. the first element is expectations of future inflation. expectations can be forward - looking, in which case inflation is self - equilibrating ; or backward - looking, in which case inflation is more persistent. the second element is economic slack, which captures the impact of aggregate demand. while slack has traditionally been measured by an output gap or unemployment gap, recent research suggests that more granular indicators of labor market conditions are needed to better capture phillips curve relationships in the data. 1 the third element is shocks. these shocks can in principle have a positive, negative or ambiguous effect on inflation. if shocks are more permanent, inflation will be more inertial. if we look back at the euro area over the past decade, most of these shocks appear to have been quite persistent and have 1 see e. g. aaronson, s., cajner, t., fallick, b., galbis ‐ reig, f., smith, c. and w. wascher ( 2014 ). labor force participation : recent developments and future prospects, brookings papers on economic