notion is, by the way, very widely recognised by central bankers and academics. secondly, to help taking some account in our monetary policy of the issue of avoiding abnormal boom - bust episodes in asset prices, which could be fed by abnormal abundance or drying up of liquidity. and thirdly, perhaps the most important reason by far, to contribute to better anchoring medium to long - term inflationary expectations, which is important for all central banks of the world and all the more important for the ecb which cannot rely, for that purpose, on long - term past records. also for this second difference with the fed concept, there are, in my eyes, both solid theoretical reasons and practical considerations associated with the transition to the euro. all taken into account, it seems to me that what is uniting us, our similarities, are more important than our differences. and we have solid explanations for our differences. i understand, in particular, that trends in money demand have not been as stable in the us as they have been in the euro area. this may partly explains the differences in our approach. overall, there is no simple escape for a central bank from a rigorous analysis of the shocks hitting the economy and the underlying changes affecting the economic structure. a central bank can never simply steer monetary policy as the result of a calculation, the final stage of an algorithm or the functioning of a mechanism. similarly to the federal reserve system, we believe that in the assessment of a financial and economic environment that is on an accelerated rapid course, the central bank needs realism and pragmatism. policy decisions must be based, ultimately, on a judgement and must be clearly explained to the public in a transparent manner. from its inception the ecb has striven to score highly on each of these dimensions and will continue to do so in face of the challenges that are waiting us ahead. thank you very much for your attention.

##an element has to do with the central bank ’ s disclosure or clarification of its monetary policy strategy. in contemporary quantitative economics terms, one could say : through the odyssean element of forward guidance, the central bank communicates the parameters of its reaction function and its policy goals. it is odyssean to the extent that a reaction function, or a strategy, is a reflection of the central bank ’ s mandate and statutes, and therefore is binding for central bank actions. not unlike odysseus who tied himself to the mast of his vessel to resist temptations, by anchoring itself to a strategy a central bank commits to never lose sight of its general purpose as spelled out in its mandate and statutes. through its delphic element, forward guidance gives information about the central bank ’ s perceptions of macroeconomic fundamentals. like the utterings of the delphic oracle, such communication reveals expectations of future events, given the current state of knowledge. to the extent that the future course of monetary policy is motivated by the underlying path of the economy, and is contingent on the direction that the economy is expected to take, the delphic component of forward guidance discloses a conditional expected path of policy. in fact, the conditionality of forward guidance statements by central banks is mainly an implication of their delphic element. two examples of forward guidance in one way or another, various forms of indications – more delphic in nature – about the conditional direction of policy have implicitly been part of central bank communication for a while, increasingly so since the mid of the 1990s. around that time, a small number of central banks pioneered the publication of numerical forecasts for the future path of their policy rates. for example, since 1997, the reserve bank of new zealand ( rbnz ) has provided a numerical projection of future policy rates. in 2005 the norges bank took such explicit forward guidance a step further by communicating not only a forecast of the short - term interest rate path, but also a confidence interval around it. these two – and many other – examples of explicit forward guidance, once more, underscore the importance of there are some intermediate steps missing in this simple view. a description of the ( likely ) transmission of monetary policy via the real and, importantly, the financial sector is outside the scope of this text. bis central bankers ’ speeches conditionality. by stressing that the forward guidance is a forecast based on current information, and consistent with the central bank ’ s