, bis central bankers ’ speeches i. e. those for july and august, show a certain moderation in the rate of job creation in this period, albeit still in a positive vein. labour costs continued to moderate in the first half of the year, reflecting the greater flexibility with which firms can adjust their labour conditions to the macroeconomic environment. if the trend prevailing in the past year and a half continues, the rise in employment may put the unemployment rate at around 20 % in 2016 q4. in the realm of inflation, the recent energy price falls have interrupted the course of recovery of the cpi. after posting positive year - on - year rates in june and july, for the first time in nearly a year, the overall price index slipped back ( by – 0. 4 % ) in august. it is important, however, to emphasise the temporary nature of this new bout of disinflation, linked to the recent oil price fall in the international markets. in fact, the rate of change of the cpi excluding energy increased by 0. 9 % in august, growing slightly faster than in july, while the indicator which excludes unprocessed food as well, so - called “ core inflation ”, grew by 0. 7 %. the latest data have not invalidated the outlook for gradual recovery of inflation reflected in the most recent forecasts. budgetary policy in 2016 as i have said in previous appearances before the senate, the primary objective of budgetary policy is to ensure that the recovery is underpinned by lasting stability. in particular, it is indispensable to persevere with the strategy of fiscal consolidation leading to the stabilisation and subsequent reduction of the public debt ratio. the improvement in the cyclical conditions envisaged in the macroeconomic scenario used to prepare the draft budget has a positive effect on public finances owing to increased tax collection, a further drop in unemployment benefits and a progressive reduction of the average interest rates paid on public debt. all this means that the budgetary policy measures to meet the budget deficit targets are less costly. specifically, the draft state budget envisages economic growth of 3. 0 % for 2016, slightly below the 3. 3 % projected for 2015, with growth of domestic demand and a progressive recovery of inflation rates which would lead to an increase in nominal gdp of nearly 4 %. against this background, the overall general government deficit for the coming year will foreseeably stand below 3 %, the ceiling established in

to our interpretation of economic data. one way to deal with uncertainty is to choose an appropriate degree of gradualism in policy decisions. according to the so - called " brainard principle " ( introduced in brainard 1967 ), increased uncertainty would warrant a more gradual response. 3 / 5 bis - central bankers'speeches there is a recent case in point on applying this principle. noting the accelerating inflation in the winter of 2021 - 2022, many of us policymakers would have been ready to raise the rates in march 2022. however, russia's illegal, brutal invasion to ukraine on 24 february 2022 both turned us back to the era of raw geopolitics and created a massive cloud of uncertainty over europe's economy. at least my initial assumption then was that it would probably have serious stagflationary consequences – i. e. both hitting growth and generating inflation, " back to the 70s ". in that context, it made sense to take a timeout and once the clouds had somewhat cleared choose the policy stance. – this context should be taken into account in all post - mortems of the recent polycrises years. more recently, however, some have argued for a strong policy response when there is a lot of uncertainty, especially about future inflation. 3 this can be seen as a risk management approach to policymaking, where we aim at guarding against the worst outcomes. for instance, during the recent inflation cycle, when inflation started to accelerate, it was important to unwind the accommodative monetary policy stance fast to guard against the danger of de - anchoring of inflation expectations. this guided us in the ecb governing council to decide on consistent rate hikes since july 2022. what can we conclude from the last two examples? judgment matters. in other words, while advances in economics have enabled us to gain a much better understanding of the macroeconomy and price dynamics, human judgment is still necessary especially in the critical moments when elevated uncertainty dominates and several options are open. in science we trust, but the art of monetary policy cannot still be replaced by artificial intelligence – at least in the foreseeable future! to summarize, uncertainties in price dynamics have indeed challenged our policymaking. the silver lining is that we have gained a lot of understanding about the appropriate policy responses in these circumstances. for me, this has above all highlighted the crucial role of inflation expectations in the making of monetary policy, as well as the