feedback loops between the global and the domestic economy, on the one hand, and between the financial and real sectors, on the other, have bis central bankers ’ speeches become more complex. in this context, it has become difficult to make reasonable impact assessment of macro - policies. moreover, the capability of standard models in the armoury of central banks in predicting growth and inflation is being questioned. primary assumptions of basic dsge models have come under attack both from policymakers and academia. there is, therefore, a need to revisit the modelling strategy in the light of the increased uncertainty, leverage and global linkages. it is important to harness appropriate statistical tools to capture the underlying dynamics of economic - financial framework. ladies and gentlemen, we are fortunate to have amidst us luminaries who are not only accomplished statisticians but some of them are at the helm of statistical administration. i am confident that the deliberations today will not only guide us in setting our statistical agenda in the reserve bank but also will go a long way in strengthening the indian statistical system, for which prof. mahalonobis worked tirelessly. i once again extend a hearty welcome to all our speakers and all our invitees, and look forward to the intellectual fare ahead. thank you. bis central bankers ’ speeches

long - term base for good economic development. in addition, we will then be able to have real wage increases again. firms set their prices according to, for instance, the costs they incur, the behaviour of their competitors and expectations of future price and cost increases. when inflation is 4 / 10 bis - central bankers'speeches high and cost increases are large, firms are more eager to raise their prices often and to pass on the increased costs to customers. it is also easier to raise prices, as competitors do the same. we saw an example of this in the riksbank's business survey last autumn, where more than two out of three companies responded that they were now raising their sales prices more often than normal and that this is mainly because costs are rising all the time. in turn, the price increases affect other companies'input costs, raising expectations of future cost increases for which they want to compensate with higher prices – and so on. companies'labour costs are also affected if wage increases are pushed up by demands for compensation for the high inflation. another problem is that if inflation is high, it varies more over time than if it remains at a low level. this makes it more difficult for households and companies to plan and make financial decisions and it leads to a poorer functioning of the economy as a whole. in such an environment, it becomes more difficult, for example, to interpret the cause of price increases on individual goods and services. is the price increase a sign of a general price increase in the economy, or has the price of the product actually increased more than other similar goods? the risk is that consumers become hardened in the long run and accept all price increases as part of inflation, making it easier for companies to keep raising prices. it is therefore important to remain active and compare prices. a credible 2 per cent inflation target acts as an anchor thus, when inflation is high, there are self - reinforcing mechanisms that allow our expectations to adjust and this contributes to keeping inflation high. but an environment with low inflation can also become self - reinforcing in a similar way. firms are then more likely to let temporary price and cost increases reduce their margins rather than pass them on to customers. the effects on other firms'prices and costs will then be smaller. businesses and households recognise that inflation remains low and adjust their expectations accordingly. this means people do not need to worry or even think about inflation in their everyday financial decisions. an inflation target of 2 per cent creates