%. germany recorded both the lowest overall and youth unemployment rates in the euro area. employment is at an all - time high with 45 million in work in the first quarter of this year. with the labour market becoming tighter, wage growth has picked up more dynamically in the recent years, supporting domestic demand. the euro is as popular today as ever before in its 20 - year history. i ’ ve lived in germany myself for two years. why does one hear so much dissent on monetary policy? this reaction, which contrasts with the general approval that our measures received in the rest of the world, might partly be explained by the novelty of our measures, and partly by the way central banks ’ communications channels work in the eurozone. banks, insurance companies, pension funds, business models and savers ’ behaviours needed to adapt to qe and negative interest rates and this wasn ’ t easy. we were fulfilling our duty ; the treaty is asking us to take the actions we are taking to preserve the stability of the euro. also, explanation of our policies to the citizens of the eurozone relies on national central bank communication. whenever they supported governing council decisions at national level, public opinion at country level was also supportive. once a decision is taken, dissent should stay within the governing council. we need to talk about today. first of all, if you look at your ammunition chest, how much have you got left? all instruments from interest rates to asset purchases, to forward guidance are ready to be calibrated. we also need to reiterate that we are symmetric in pursuing our objective, i. e. that to keep inflation above our target as much as below it. also, in the future, if the experience is telling us anything, it is this : we have to have a fiscal policy of some significance in the eurozone. the first time i mentioned this was in a speech i gave in jackson hole in 2014 and i repeated it thereafter several times. i always mention the fact of the need to move from a rules - based national fiscal policy to an institution - based fiscal capacity. we have countries that have fiscal space and don ’ t use it. even if they were to do something, what would be useful to the rest of the euro area would only be the spill - overs. this means that steering the aggregate euro area fiscal stance in an optimal way through decentralised policies is difficult to achieve given that national policies are geared to national stabilisation needs. furthermore

which the decisions of households and firms are not materially affected by the need to insure against future arbitrary or mischievous changes in government policy. just as alan would define a good monetary policy as one which leads people to stop talking about inflation, i think he would call a good tax policy one under which people stop talking about the tax system. in the last decade we have had a debate about whether such stability should be implemented by quantitative targets or not. in monetary policy we have seen the spread of ‘ inflation targets ’, and targets have begun to permeate other areas of economic policy too. you will not be surprised to learn that i think that such numerical targets have a role. but whether they are appropriate or not is a subsidiary question, and it is one that is related to the political economy of how to ensure the transparency of policy, the accountability of those responsible for it, and the way in which households and firms form expectations of policy : monetary, fiscal or other. since the political economy varies from one country to another, so will the appropriate method of achieving price stability in particular, and economic policy stability in general. the crucial and overriding point is that a market economy cannot flourish if policymakers behave in ways that lead private agents to expect future economic policies – be those future monetary, fiscal, or legal policies – to be subject to arbitrary or capricious changes. of course, an expectation of a stable regime will rarely translate into stable outcomes, and it would be irresponsible of policymakers to let such a misconception take hold. a well designed set of institutions will lead to responses being predictable, but cannot guarantee that outcomes will be. and there is a pressing issue here. in the us, inflation has been both low and rather stable. over the past decade it has varied between 1. 0 % and 3. 8 %, so we can with some justification say that inflation no longer “ materially enter [ s ] into the decisions of households and firms. ” in the uk inflation has, if anything, been even more stable. but this success carries a risk for the future. inflation expectations may be sensitive to a large but temporary shock that moved inflation outside the range within which it has remained for some years. with their belief in stability jolted, households ’ inflation expectations might move by much more than was justified by the temporary nature of the shock. that would make it more difficult for the central bank to bring inflation back to target. the moral of this particular