unprecedented by major advanced countries over the past 40 years. one useful lesson on forward guidance critics are largely arguing with the wisdom of hindsight. that said, looking back, there is probably one useful lesson. our reliance on forward guidance on rates was perhaps excessive in principle in the face of exceptionally large and unexpected shocks, and too rigid in its substance. as i have said previously, iv we cannot totally bind our hands with rules, and should keep some element of discretion facing unexpected data or events. forward guidance is never setting policy on auto - pilot. there will always be an element of judgement, including about the distribution of risks around the staff projections. central banks should page 7 sur 13 be predictable, but not pre - committed. lift - off from the effective lower bound was double - locked, being both state contingent ( three inflation criteria ) and sequenced after the end of net asset purchases. with more flexibility, the first interest rate increase could have occurred earlier than july 2022 ; but it is unlikely that this would have been more than one or two meetings before. in the grand scheme of things, it would not have changed very much because financial conditions had already anticipated future rate increases through an increase in medium - to long - term interest rates. in the future, i wouldn ’ t rule out a certain return to forward guidance, but seen as more indicative, more statedependent … and more modest – i. e. less powerful as an instrument. 2. now, “ too much ”? the alternative criticism is not about the past but about the present situation, i. e. that we would have already done too much and run the risk of tipping the economy into recession. i will not focus on the discussion of our last 25 bp hike on september 14. while i can fully understand this discussion, my analysis is of our broader 450 bp increase since july 2022. some good news … headline inflation has already fallen back from its peak of 10. 6 % in october last year to 5. 2 % in august, and strangely enough this criticism contains elements of good news. firstly, it implies that monetary policy has indeed had a powerful effect on the economy. not so long ago, there was a debate about whether the is curve had become fairly flat and our instruments were weak in combatting inflation. second, it shows, at least in several countries including france, that the inflation psychology has switched, with receding concern over upside inflation risks. our resolute monetary policy over

ratings. they are therefore more dependent on rating agencies. in addition, investors ’ trust in the rating process may have been encouraged by the regulatory and prudential system, which uses ratings as a basis for steering the investment strategies and decisions of the institutions in charge of collecting public savings. the second source of misunderstanding stems from the metric used for rating structured products. it is identical, in terms of presentation, to that used for traditional bond products. yet, the two universes are different. the consequences of assigning a aaa rating to a cdo and to a corporate bond are not the same. the risk profile is different. the potential volatility of a aaa rating for a structured product, in particular, is far greater than that for a traditional product ( for a shock, all other things are equal, of the same magnitude ). structured products are built on correlations and leverage. if one of the riskier tranches is affected by a default, the value ( and the rating ) of the other tranches will also be affected by contagion, through the decrease in their subordination level. of all asset classes, cdos are those whose rating is the least stable over time. to give just one extreme example, a aaa - rated cpdo was recently downgraded by nine notches in one day. for investors, a aaa rating has traditionally been associated with a stable investment. it is now evident that there are stable aaas and less stable aaas, which considerably reduces the clarity of ratings. it would have been simpler to adopt a specific metric for structured products and, by doing so, many misunderstandings that were responsible for the current turmoil could have been avoided. avenues for the future hopefully these thoughts will open up some avenues for the future. i believe that there are two symmetrical pitfalls to be avoided. the first would be to continue as before, with a few minor changes to the existing system. the turmoil observed over the past three months, and its potential impact on the real economy, are too important. furthermore, the rating process will inevitably play a key role in the implementation of basel ii. this will involve a more refined assessment of risk, in particular through the promotion of internal models, and greater use of external ratings. the second mistake would be to rush into the regulation of rating agencies. we cannot rule out that, at some stage, such regulation may become necessary. after all, information is a public good and rating agencies are the providers of