and fintech firms over the past year, we have often heard them confirm our view that the pandemic is acting as a catalyst for their business models. market developments that normally need four to five years are now taking place within the space of four to five months. people expect a great deal from electronic payment systems. they want them to be safe, quick and above all convenient. this also places demands on us as central banks and on the europewide infrastructure we operate, such as the system for large - value payments that the bundesbank improves and advances together with the banco de espana, the banca d ’ italia and the banque de france. advances on the digitalisation front have also sparked a debate surrounding digital currency. july saw the eurosystem launch a two - year investigation phase on the introduction of a digital euro. this digital currency could be implemented alongside commercial banks ’ book money as failsafe, universally accepted central bank money. the intention is to create a digital euro that makes it easy to send and receive payments in real time while at the same time satisfying high standards in terms of payment data integrity and security. the digital euro could be used to underpin innovative products developed in the private sector. for instance, smart contracts – protocols that automatically execute payments once the right contractual conditions have been met – might open up entirely new business areas. 2 / 3 bis central bankers'speeches what matters from the bundesbank ’ s perspective is that the traditional allocation of functions between private and public players is not undermined. central banks deliver the backend infrastructure in payments, but it is up to the ( european ) private sector to develop customerfriendly payment solutions for end users. it has not yet been decided what features the digital euro might have or when it might be introduced. one thing is clear, though : the digital euro would complement cash and book money, not replace them. 3 conclusion ladies and gentleman, as important as money may be in our business and economic world, there is one particular spanish saying i hold very dear : “ vive. el dinero se recupera, el tiempo no. ” – “ live. you can get back the money but not the time. ” on that note, mr huttner, please accept my best wishes that you will have plenty of time to forge new contacts and foster relationships, to get to know and love madrid – and, of course, to represent the bundesbank well here in spain. i

european countries, inflation was above our inflation target because of oil and food prices and the european central bank raised its interest rate only month before. although it is certain that the, at that time actual, forecast did not match the data perfectly, with no doubt it identified the break point and by that served very well its purpose. naturally, the forecast accuracy, i. e. the ability to identify breaking points reasonably well, has not come out of the blue sky. the actual way in which forecasts are produced and used in central banks has changed substantially over the past two decades. these changes have reflected developments both in the economic ( and econometric ) theory and in monetary policy regimes. bearing in mind the failure of large - scale models in 1970s, the profession has started to prefer smaller - scale models with a sounder microeconomic background, built in recent decades usually along the lines of new keynesian economics. well, maybe we are still not able to match all the statistical numbers perfectly, but i hope that we are more skilled in recognising important breaks in the development of our economies than we were 10 years ago. indeed, the use of general equilibrium models forces us to think about the economy in a consistent way and the use of multivariate filters has improved our knowledge about the current position of the economy in the business cycle. you probably all remember that inflation targeting was in our case introduced in a challenging situation, after a period of currency turmoil in may 1997, which ended the fixed exchange rate period and resulted in higher inflation and rising inflation expectations. the economy needed a new nominal anchor in order to return to a disinflation path. inflation targeting was chosen as “ the best of all bad ” alternatives at the time. such a sudden switch from a fixed exchange rate system to inflation targeting required a radical and fast change in the central bank ’ s mentality. this was perhaps the biggest challenge that the cnb had to face. over the past five years it has involved much work on improving our forecasting tools, leading to substantial development in our internal analytical processes. at the beginning of 2002, the cnb settled on a new forecasting process. this integrates expert judgment and short - term analyses – which were the key pillars of the cnb ’ s forecasting tool - kit in the first years of inflation targeting – with a macroeconomic model that provides a consistent framework for the policy analysis. an important element of this step was a switch from a forecast with a