? my final remarks concern communication. central banks have come a long way in being transparent about their decisions and explaining their reasoning. however, our communication is too often addressed to a narrow group of people – the media, the markets and economists. we need to do a better job of reaching the general public. and this means two changes of paradigm : it is not only a question of democratic accountability – however essential this remains –, it is also key for our economic efficiency. better - informed firms and households will also make better decisions and ones more aligned with our strategy, i will come back to it. secondly, we should evolve from a narrow objective of “ transparency ” to a wider objective of “ clarity ”. this means focusing on what is heard rather than what is said : we cannot merely “ publish and go ”. as tiff macklem, my canadian colleague, says “ public communications should be in plain language and free of jargon. we should speak as public servants and peers, not as oracles delivering messages from an ivory tower. ” x and effective speaking also requires active listening. at the start of next year, consistent with the ecb endeavours, we will host a number of “ banque de france listens ” events in all regions to hear what french citizens and smes think about inflation and monetary policy. we will then adjust our communication depending on what we hear. let me elaborate on the economic stakes of this communication. our inflation targeting policy will be significantly more efficient if economic agents, be they households or businesses, do actually understand it, accept it and believe it. hence it should be seen as clear, legitimate and credible. i insisted earlier on clarification ( question 2 ), let me now conclude with legitimacy and credibility. one of the most difficult challenges for a central bank with a price stability mandate is how to explain a positive inflation objective. the general public often does not understand why a central bank would deliberately try to increase inflation. we need to explain better that although our price stability objective is page 9 sur 10 defined in terms of hicp inflation, we are actually seeking a general average increase in all nominal variables, including wages and nominal gdp. few people spontaneously want an increase in consumer prices, but most do want an increase in their nominal incomes. furthermore, households, firms, financial institutions and governments enter nominal contracts ( negotiate wages, take out mortgages, buy sovereign debt etc ) based on expected inflation. if actual inflation is higher or lower than these

somewhat mysterious, unobservable object. that ’ s no longer true. treasury inflationprotected securities – bonds that are colloquially called tips – make coupon payments that are indexed to the inflation rate. this indexation means that tips coupon payments provide a fixed amount of purchasing power to the bondholder, not a fixed amount of dollars. as a result, tips yields provide a useful measure of the real interest rate. when we look at tips yields, we see that real interest rates have fallen sharply over the past six years. in the first half of 2007, five - year tips had a real yield of about 2. 5 percent and 10 - year tips also had a real yield of about 2. 5 percent. by 2012, both real yields had fallen well below zero, and while they have risen slightly, real yields continue to be low today. the five - year real tips yield is still below zero, around negative 0. 3 percent. the 10 - year real bis central bankers ’ speeches tips yield is only slightly positive – around 0. 4 percent. note that, together, these market prices imply that the five year - five year forward real interest rate is around 1 percent. the 10 year - 10 year forward real interest rate is only slightly higher. why have real interest rates fallen so much? at one level, the answer is obvious : monetary policy. certainly, over the past seven years, the fomc has taken a number of actions designed to put downward pressure on nominal bond yields. with inflationary expectations well - anchored, these actions tend to push downward on real interest rates. but i think that the obvious monetary policy answer is actually deeply misleading. it is true that the fomc takes monetary policy actions so as to influence the real interest rate. but, ultimately, these actions are designed to allow the fomc to achieve its dual mandate of price stability and maximum employment. in 2007, the macroeconomic outlook was broadly consistent with the committee ’ s mandated objectives. in this sense, we can say that the real interest rate of 2. 5 percent was mandate - consistent1 in 2007. the situation is different in 2014. as i ’ ve argued in previous speeches, the outlook for both employment and prices is too low relative to the fomc ’ s goals. for example, personal consumption expenditure inflation – the fed ’ s preferred measure – is currently at 1. 6 percent. i expect it to remain below the fomc ’ s inflation target