the largest part of these forecast errors can be explained by assumptions about energy prices and their direct and indirect effects on inflation, indicated by the yellow and red bars. this is not surprising given the large shocks to energy prices we observed in this sample. other non - energy related errors also play an important role in the latter part of the sample. i ’ m convinced that this multi - pillar approach with a stronger focus on actual data realisations has served us well recently and that we need to continue to be data - dependent going forward. at the same time, as the decline in forecast errors in chart 5 shows, there are also reasons to regain some confidence in our projections. this, together with the fact that a lot of the relevant and comprehensive data such as that on wages, productivity and profit margins are only published on a quarterly basis, suggests to me that projection round meetings of the governing council will be the key meetings for our interest rate decisions. currently, the monetary stance remains historically tight. this is not only the case for the level of policy rates themselves, but also when comparing real interest rates relative to the natural rate of interest, r - star. chart 6 shows this gap between the ex - ante real interest rate and r - star for the euro area and the us, based on dnb research. of course, these estimates always have to be taken with a grain of salt given the sizeable model and estimation uncertainty as highlighted by the huge confidence bands. but the picture looks similar across a wide array of eurosystem models. according to this model, the degree of monetary tightness is comparable across the two regions. however, as the disinflationary path in the euro area continues and the medium - term inflation outlook further improves, we become increasingly confident that inflation will return to target in a timely manner. consequently, it can soon be appropriate to ease the currently restrictive monetary policy stance, and gradually take our foot off the brake. as a result, policy rates will slowly but gradually move to less restrictive levels. the precise timing, speed and scale of easing will also follow a data - dependent approach, with our projections being a key ingredient. to give you a perspective on the path of policy normalisation based on the march eurosystem staff projections, chart 7 shows optimal policy scenarios. optimal here means that monetary policy tries to minimise the deviations of inflation from target and output from its potential *. the range, in turn, is based on both a set

nout wellink : monetary unions in europe and the us - just how different are they? speech by mr nout wellink, president of de nederlandsche bank and president of the bank for international settlements, at the institut international d ’ etudes bancaires, amsterdam, 17 may 2002. * * * introduction first of all, thank you for the invitation to speak to you today. now that we have a monetary union, there has been discussion about the role of national central banks in the euro area, including some questions about their ongoing relevance. clearly you regard us as relevant or you would not have invited me to speak! it will come as no surprise that i also think that national central banks are relevant, and will continue to be so. today i would like to briefly compare monetary policy in the euro area and in the us. of course there are differences between the two areas, but there are also important similarities. this comparison can help us understand the reasons behind our differences and may provide some useful insights into the institutional implications for euro area monetary policy in the future. i will structure my remarks around three themes : the policy goals of the two monetary unions, their organisation, and the monetary policy decision - making process in each system. goals and philosophy let me begin by comparing the goals or mandates of the eurosystem and the federal reserve system. here in europe the primary focus of monetary policy is to maintain price stability. in contrast, the fed has multiple objectives for monetary policy. their goals are to achieve maximum employment, stable prices and moderate long - term interest rates. an important explanation for our different mandates can be found by looking at our economic histories. in europe, monetary union is the most recent step in an ongoing process of political and economic integration. the hyperinflation experienced in the first half of last century in some european countries, in particular in germany, has played an important role in ensuring that european monetary policy is focussed on price stability. our experiences in europe contrast with those in the us. a key us event that commentators frequently refer to is the great depression. monetary policy is often blamed for adding to the severity of the great depression in the us. i think that is a reason why employment and interest rate objectives remain in the fed ’ s mandate, and why policy makers there react so quickly to signs of slowing economic growth. under normal circumstances, policy makers on both sides of the atlantic are likely to take similar decisions. however, around the time that the