peter praet : communicating the complexity of unconventional monetary policy in emu speech by mr peter praet, member of the executive board of the european central bank, at the 2017 ecb central bank communications conference " communications challenges for policy effectiveness, accountability and reputation ", frankfurt am main, 15 november 2017. * * * central bank communication has been fundamentally affected by the fallout from the global financial and economic crisis. 1 throughout that period, central banks succeeded in preventing a de - anchoring of inflation expectations. to do so, they adopted a broad range of unconventional measures, the functioning of which is very difficult to explain to the public. this applies, for example, to the notion of negative nominal interest rates, which is hard to communicate because it challenges the conventional wisdom that thrift and patience are virtues that deserve pecuniary remuneration. against this backdrop, i would like to discuss three communication challenges that are particularly relevant to the euro area and the ecb ’ s monetary policy. the first challenge is to bear in mind the multi - country nature of our monetary union, which requires communication to be tuned to the specific context of different national audiences so as to ensure broad participation in the public debate on euro area monetary policy. the second challenge for monetary policy communication is to take into account the increasing complexity of monetary policy by ensuring consistency over time and clarifying the state contingency of the policy stance. to ensure consistency over time, it is essential for the central bank to adopt a clear organising framework, centred on the ultimate objective, for the ecb consisting of price stability, and adhering to a state - contingent reaction function that determines how the monetary policy stance adjusts to changing economic conditions. as the economic environment that monetary policy faces may indeed be subject to massive swings, state contingency may entail pronounced differences in the monetary policy stance over time. this, in turn, requires careful explanation – in particular in circumstances that call for unconventional measures and, hence, leave markets and the general public without empirical precedent to help them anticipate and rationalise the central bank ’ s actions. the third challenge is for the communication framework to provide clarity on the use of specific tools in a multi - instrument context, when the central bank reaction function acquires an additional dimension. in normal times, the central bank reaction function mainly specifies the contingencies for loosening, tightening or maintaining a given policy stance. in unconventional times, it also needs to spell out which tool would

twenty years, it seems to me that an unfortunately well - founded criticism could be that we have constantly under - assessed the rapidity of the stream of history : the rapidity of the deterioration of the situation in the ussr, the rapidity of the collapse itself, the rapidity of the enlargement process, the depth, the strength and the intensity of the “ desire of europe ” which is spreading in the countries in transition. second word : stability. economic and financial stability, in a period of excessive volatility and of wide boom - bust episode, financial and real stability appear to be a very precious asset. over the last twenty years, we have constructed a new world : technology has permitted instantaneous communication and incredibly powerful real - time computation. globalization has created new cultural, conceptual, commercial and financial links between all economies including previously centrally planned systems ; together technology and globalization are progressively driving us to a unified planet of universal rules and regulations, code of conduct and practices, market procedures and market instruments, accounting standards, etc. in this new world, phenomena which had traditionally a local or even a national impact may be amplified and become dangerous at the global level : amplification of financial cycles, herd behaviour, global contagion. analysing the opportunities and the risks, and understanding the functioning of our system with a view to making it as stable as possible is a very exiting, ambitious and urgent task. and, last but not least, union. i can not avoid mentioning the question of completing monetary union with the entry of the united kingdom. i would like to stress the following points in this regard : let us never forget that the uk is unanimously warmly welcomed in the euro area. it depends only on the decision of the british people and of the british authorities to join in. you know that the germans and the french on the continent, as well as all other nations on the continent are very warmly hoping for a positive decision by the uk. i thank you for your attention.