accommodation? here it is useful to first consider the market environment we were facing during the first half of this year and up until the 13 june governing council meeting. you can see this on my second slide. what you can see here is that, compared to a year earlier, uncertainty around the future path of 3 / 11 bis central bankers'speeches short - term interest rates had increased measurably. in the first months of this year, markets believed that an unusually wide range of policy outcomes would be possible in 2019. a dispersion of views is not in itself a bad thing, of course. it is usually an encouraging sign that markets remain attentive to changes in the outlook. the information - processing role of markets can in fact be expected to recover during periods of policy normalisation. herding, by contrast, is often a sign of perilous complacency. a dispersion of views does become a source of concern, however, if it reflects uncertainty around the central bank ’ s reaction function. such uncertainty is not unusual in periods of transition. once policy has succeeded in shifting upwards the distribution of risks around the growth and inflation outlook, uncertainty about the future path of interest rates naturally begins to increase. i would argue, however, that our environment is characterised by two factors that vindicate the need for stronger forward guidance and that have contributed to amplifying uncertainty around our near - term policy intentions. the first has to do with the peculiar anatomy of the inflation process we are currently facing. although uncertainty around the inflation outlook is receding and a sustained convergence of inflation to levels closer to our aim is in sight, underlying inflationary pressures have long proven stubbornly weak – to an extent that, in the past, threatened to destabilise public confidence in the return of inflation to levels closer to 2 %. 10 in addition, there is still considerable uncertainty as to whether the key parameters underlying our workhorse phillips curve models have undergone structural change – whether inflation has become less responsive to economic slack, be it through globalisation, technological progress or structural product and labour market reforms. 11 at a time when policy rates remain deeply in negative territory, such parameter and model uncertainties imply that the costs of committing a type ii error – of failing to anticipate a much slower than usual return of inflation to pre - crisis levels – may be uncomfortably high. communicating our expectation that the ecb key interest rates would remain at their present levels at least through the

envisaged subsequent path of future short - term interest rates and, ultimately, on the expected level of the terminal rate, and if so, how? there are two broad ways in which central banks can increase transparency around the future path. the first is to publish policymakers ’ projection of the future path of short - term interest rates conditional on the macroeconomic outlook. 14 the second approach is to broadly maintain within the confines of current practice, which is geared towards explaining in more detail the central bank ’ s reaction function and to communicate policymakers ’ conditional expectation of the likely future pace of policy adjustment. the key difference between the two approaches is, hence, the level of precision with which policymakers are willing to communicate their future policy inclinations. the first approach is by no means uncharted territory in the central banking community. a number of pioneering central banks, led by the reserve bank of new zealand in 1997, regularly publish numerical interest rate forecasts to reinforce their inflation targeting commitment, very much in line with modern monetary theory. 15 the experience of these central banks shows that there have been many instances where guidance on the future path has been successful in coordinating disperse market views. 16 but 6 / 11 bis central bankers'speeches there have also been instances of stark and persistent discrepancies between the path expected by market participants and that published by policymakers. 17 some academics have resolved this impasse by arguing that the optimal degree of transparency depends on the central bank ’ s ability to forecast the economy. 18 put simply, transparency around future policy intentions is likely to be welfare enhancing if the central bank has established a convincing track record of systematically beating private sector inflation forecasts. but neither the private sector nor central banks have been particularly good recently at predicting inflation. more, even a well - established projection track record may not be enough to tilt the balance in favour of publishing a path for future policy – mainly for four, largely interrelated, reasons. first, it is often more important how central banks communicate than what they communicate. back in 2004, alan blinder already pointed out that a monetary policy committee that releases dispersed views could cause a “ cacophony ” in communication and ultimately create more confusion than clarity. 19 indeed, i believe that one reason why the ecb ’ s enhanced forward guidance has been so effective is precisely the fact that it represents the governing council ’ s unanimous view. for a large committee to agree on an entire path of future policy rates is, however