international commodity markets and international distribution systems stemming from geopolitical issues such as the situation in ukraine and the middle east. there is also a risk that the global economy will become fragmented, reflecting strengthened efforts to address economic security, and risks pertaining to u. s. fiscal conditions. as i will discuss later, while i foresee that it will take some more time to achieve the bank's monetary policy goal of sustainable and stable inflation, if, in the meantime, medium - to long - term risks materialize, the bank may need to change its projected timing for achieving that goal. it is extremely difficult to precisely predict the upside and downside risks to economic activity and prices that i have discussed. for this reason, i believe it important to carefully monitor changes in the environment, including developments in economic activity at home and abroad and in financial markets. iii. conduct of monetary policy changes in the monetary policy framework taking account of the economic and price developments i have explained so far, i would like to talk about the bank's conduct of monetary policy, while sharing my own views. first, i will summarize the bank's current conduct of monetary policy. at the monetary policy meeting ( mpm ) held in march 2024, the bank judged that it was now within sight that the price stability target of 2 percent would be achieved in a sustainable and stable manner. it revised the policy framework in this light ( chart 12 ). specifically, the bank terminated largescale monetary easing measures, including yield curve control and the negative interest rate policy, as it considered that these measures had fulfilled their roles. the bank decided that it would guide the short - term interest rate as a primary policy tool and that, with the price stability target of 2 percent, it would conduct monetary policy as appropriate, in response to developments in economic activity and prices as well as financial conditions, aiming at sustainable and stable achievement of the target. in addition, the bank judged that the inflation - overshooting commitment regarding the monetary base had fulfilled the conditions for its achievement. it should be noted that these policy changes do not signify a shift to monetary tightening. in other words, given the current outlook for economic activity and prices, the bank anticipates that accommodative financial conditions will be maintained for the time being. in hindsight, i believe that these policy changes were implemented smoothly for the most part, given the absence of any major market disruptions in their wake. at the

of course, future economic shocks. consequently, the surrounding uncertainty can also be divided into similar parts. let me first shortly address the last point, something we can call the “ shocks ” uncertainty. it is necessary to admit that both today ’ s central bank forecast and today ’ s central bankers ’ decision are deterministic from this point of view. this means that no shock that the economy will face in the future is incorporated into both the forecast and the decision. in other words, there is no way of avoiding the last - mentioned uncertainty connected with future shocks and neither the central bank nor the markets have any superior information about them. the uncertainty surrounding the first two mentioned points – the current state of the economy and future monetary policy – will be the heart of my remarks tonight. being forecasters we all face uncertainty surrounding the knowledge about the current state of the economy. this current state should be thought of as a shortcut to all the inflationary determinants brought from the past, but due to the transmission lags having an impact on future developments. every forecaster, and of course also the central bank, has his own opinion about the economy ’ s current state. one question arises immediately : should the central bank look at market forecasts and use them as a source of information about the economy ’ s current state and for its decision - making? my answer is : market forecasts should not be neglected. on the other hand they cannot be the core for decision - making and the central bank must rely primarily on its own structural modelling. this implies that despite all the transparency and communication, the central bank will – from time to time – have to surprise other forecasters and the market. let me now briefly explain why this is the case. in their article “ inflation forecasts and monetary policy ”, ben bernanke and michael woodford discuss the case of the central bank fully relying on market forecasts for its decision - making. they conclude that relying only on the market inflation forecast the central bank cannot perfectly stabilise inflation on the target. in the economist ’ s technical jargon, it can be shown that the rational expectations equilibrium under such circumstances does not exist. although such a statement looks suspicious, there is quite a simple intuition behind it. let ’ s assume that the central bank can infer the current state of the economy only from the market forecasts. then, following the market forecasts, the central bank will clearly settle monetary policy in order to achieve its target