illicit activity. if it is designed to be financially transparent and provide safeguards against illicit activity, a central bank digital currency for consumer use could conceivably require the central bank to keep a running record of all payment data using the digital currency — a stark difference from cash, for instance. a system in which individual payments information would be recorded by a government entity would mark a dramatic shift. a see https : / / www. federalreserve. gov / paymentsystems / coin _ data. htm. see, e. g., cpmi and markets committee, central bank digital currencies, march 2018, https : / / www. bis. org / cpmi / publ / d174. pdf. - 11 related question is whether the federal reserve has the authority to issue currency in digital form and, if necessary, to establish digital wallets for the public. there could also be profound monetary policy implications. some economists have argued that a central bank digital currency could address the problems posed by the zero lower bound by potentially transmitting monetary policy directly to the public. executing monetary policy in such a manner would effectively imply the elimination of all physical cash and the power to impose a negative rate, or a tax, on households ’ holdings of digital money. my own strong preference is to address the effective lower bound by using our existing tools vigorously, since i view the cost - benefit assessment of negative rates as unattractive for the current u. s. context. financial stability considerations are also important. the ability to convert commercial bank deposits into central bank digital currency with a simple swipe surely has the potential to be a run accelerant. here, too, the role of banks in providing financial intermediation services could be fundamentally altered. finally, there could be operational risks to introducing a central bank digital currency. for starters, this might require the federal reserve to develop the operating capacity to access or manage individual accounts, which could number in the hundreds of millions. a myriad of other operational challenges would need to be addressed, including electronic counterfeiting and cyber risks. it is worth noting that the technologies used currently for private - sector digital currencies do not provide the same level of information technology reliability, integrity, and scalability as - 12 central bank systems in use today. many of these technologies do not provide for clear, predictable, and final settlement, which is a core tenet of payment systems. 20 that said, some jurisdictions may move

at time horizons stretching beyond those usually adopted for the construction of central bank inflation projections. because of the long - term relation between money growth and inflation, money has leading indicator properties on future price developments. though it is fair to say that the apparent link between monetary developments and inflation has deteriorated over the recent years, there is still strong statistical evidence of a link between monetary growth and inflation at a low frequency. this relation holds for the euro area, but also for the us, the uk and large oecd countries, with monetary trends systematically leading inflation trends. 4 the implication referred to is the need to cross - check the information on inflationary pressures and risks to price stability ; this cross - checking implies that we bring together and compare different analytical strategies and that we systematically use all the information relevant to decision making. the main issue is to ensure that risks to price stability over the medium term do not materialize and that medium to longer - term inflation expectations remain solidly anchored at levels consistent with the price stability objective. such anchoring is a prerequisite for monetary policy to make an ongoing contribution towards supporting sustainable economic growth as well as job creation. of course, monetary policy does not react mechanically to monetary developments, but rather responds to the information in monetary aggregates that is relevant for maintaining price stability over the medium term. to make best use of the informational role of money, however, we have to address numerous and increasing challenges. it is worth noting that not everybody is convinced that globalisation has played an important role in the flattening of the phillips curve. for instance, frederic mishkin, axel weber and donald kohn emphasize the uncertainty surrounding the quantification of this globalisation effect, and laurence ball even questions this effect on theoretical grounds. part of these doubts comes from the apparent lack of robustness of the result indicating that domestic inflation has become more sensitive to global output - gap fluctuations, which tends to weaken the case for the globalisation explanation of the flattening of the phillips curve. benati l. ( 2007 ), “ long - run evidence on money growth and inflation ”, forthcoming in the ecb working paper series. one major difficulty is identifying in real time the nature of monetary developments and their implications for future price developments. the challenge of monetary analysis is to see through the noise in monetary data to recover those underlying trends which are relevant for monetary policy decisions. meeting this challenge has not been straightforward in recent years in the euro area. first of