and labor unions are all considered to avoid materialization of such risk. with economic fundamentals improving steadily, it is crucial that people spend, invest, and distribute money, keeping the economy moving by circulating money, rather than keep money in reserve. i believe it is necessary that more people become aware of the importance of preventing the fallacy of composition from materializing, and that firms and households must change their mindset to a further degree. concluding remarks in shaping modern monetary policy, central banks face the considerable challenge of adopting new measures when the economy is likely to be undergoing fundamental structural changes. communication with the public and the market will definitely be more difficult. however, central banks need to promote communication by providing a thorough explanation on their conduct of monetary policy, including the issues i have discussed, and by sharing the challenges we face. bis central bankers ’ speeches financial markets pay extremely close attention to each and every word central banks release. they tend to show a strong reaction to the release of detailed information such as specifics in a numerical form. in any financial market, the keynesian beauty contest, in which anticipation of others ’ reactions will be taken more seriously than fundamentals, is sometimes in evidence. therefore, overreaction in markets cannot always be avoided. in addition, central banks are directly intervening to a considerable scale in asset markets, where they had not heavily intervened in the past. thus, markets ’ behavior of always being looking - forward and trying to be one step ahead of others might become strengthened. all things considered, it is certain that central banks ’ communication with the market and the public increasingly will have to be based more on the economic mechanism and the comprehensive assessment. the market will demand more clear and concrete information from central banks. continuing to meet this demand, however, does not necessarily lead to enhancing economic welfare because it is difficult in practice to define the systematic policy reaction function. i believe that the desirable degree of central bank accountability is to offer judgment based more on a discretional comprehensive assessment while providing basic transparency. i hope this idea will be shared widely among the public and the market. bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches bis central bankers ’ speeches

important change in direction, and that i could not keep my opinion to myself on such a fundamental issue. ” was mr weber correct when called the launching of the smp an “ important change in direction ” for the ecb? we are, in the european framework, in a unique situation. we have a single currency, a single monetary policy and a single system of central banks for the euro area, the “ eurosystem ”, comprising the euro area national central banks and the ecb. we issue the single currency for 17 sovereign nations and for 331 million fellow citizens. that explains why we have features ourselves that are not the same as in a fully - fledged federation. in particular it explains why we have a principle of speaking with one voice. question : why could the majority of the governing council accept the decision to launch the smp, but not mr weber? what is your explanation for this divergence of opinions? i have no comment. bis central bankers ’ speeches question : how do you explain the smp to ordinary citizens who fear that the ecb is engaged in the monetisation of debt and creation of inflation? as you know, securities are purchased by the eurosystem in the secondary market, after they have been issued and found a first buyer. and we always withdraw all the liquidity which has been injected with the smp, so that we do not practise quantitative easing, which has been used in other economies. the smp is one of the non - standard measures, which are transitory, we deemed necessary in view of the abnormal situation in markets, to help restore a normal transmission of monetary policy. another example of important non - standard measures was the full allotment at a fixed interest rate for liquidity with a duration of six months, even up to a full year. this programme of liquidity provision with exceptionally long maturities has been phased out. we also had a programme in which we purchased covered bonds. that has also expired. question : in your opinion, should an ordinary euro area citizen take a fixed - rate mortgage or a variable rate mortgage? by a variable rate mortgage i mean a bank loan with one of the euribors as its reference rate. [ laughter ] do not count on me to take the job of the investment advisors. i would only say to my fellow citizens that they can rely on us to be an anchor of stability at the level of the entire euro area. since the euro was set up we