, a faster pace of rate adjustment may be warranted ; in the other direction, if the incoming data indicate slower - than - expected disinflation or a faster pace of economic recovery, then a slower pace of rate adjustment may be warranted. these considerations reinforce the value of a meeting - by - meeting and data - dependent approach that maintains two - way optionality and flexibility for future rate decisions. the 2025 assessment of monetary policy strategy an important element of the 2021 monetary policy strategy review was the commitment to assess periodically the appropriateness of the monetary policy strategy and it was flagged that the next assessment would take place in 2025. as indicated by president lagarde at the july press conference, the preparatory work by the eurosystem staff for this assessment has now started and the governing council expects to conclude this assessment in the second half of 2025. the 2021 strategy review followed an eighteen year gap since the 2003 strategy review and was naturally a very thorough exercise. the 2021 review has served us well and important elements do not require any re - assessment. in particular, we will maintain the symmetric, medium - term oriented two per cent inflation target, which has been 2 / 3 bis - central bankers'speeches essential in re - anchoring inflation expectations coming out of the low - inflation period and in keeping inflation expectations well anchored at target during the inflation surge period. our 2025 assessment will consist of two broad strands : economic developments since the pandemic ; and the implications for monetary policy. we will assess the cyclical and structural factors shaping the inflation and economic environment in the light of the recent inflation experience, analyse the likely evolution of those factors over the years ahead and examine the implications for the inflation challenges that may confront the ecb. as part of this analysis, we will also look at the possible enhancements of the existing analytical toolkit, including forecasting techniques. we also assess the implications of the changed inflation environment for the monetary policy strategy. this will include reviewing the lessons learned from the low and high inflation periods and our experiences with the evolving roles of the instruments in the policy toolkit over the monetary policy cycle. we will furthermore examine the operationalisation of the medium - term orientation of the monetary policy strategy, with a focus on the ecb's reaction function to both upside and downside threats to the anchoring of inflation expectations to the target. this will includes the analysis of how risk and uncertainty should inform both policy decisions and policy communication. 1

##9908en. pdf ). see krugman ( 1980 ). gourinchas et al. ( 2010 ) estimate that the united states earned a positive return differential on its external balance sheet of about 2 % per year in real terms over the period 1952 – 2009 ; other studies find smaller effects. moreover, it can be disputed as to whether this “ privilege ” also holds for countries with a currency with a status less important than the us dollar. for instance, gopinath, itskhoki and rigobon ( 2010 ) find large differences in the extent of long - run exchange rate pass - through to us import prices between us dollar - priced goods ( 25 % ) and non - us dollar - priced goods ( 95 % ). bis central bankers ’ speeches points. 22 this might be particularly relevant in circumstances when importing deflation might create risks to price stability over the medium term. at the same time, low pass - through may exacerbate real exchange rate volatility as relative prices adjust less strongly, thereby failing to dampen movements in the nominal exchange rate. international currency status may therefore partly hamper the benefits of having a flexible exchange rate. currency internationalisation may generate costs, too. it may make monetary developments more difficult to interpret, with shifts in non - resident demand for banknotes and deposits having a direct impact on money aggregates. it may complicate the conduct of monetary policy if money demand and capital flows become unstable as a result of external shocks, as the experiences of the deutsche mark and the swiss franc after the demise of the bretton woods system starkly illustrate. the outbreak of the global financial crisis has even added some new dimensions to the debate. one cost which has now become more apparent is the “ exorbitant duty ” of international currency issuers, the flipside of “ exorbitant privilege ”. international currency issuers provide insurance to the rest of the world in times of global financial market stress, which gives rise to potentially large financial transfers between economies. 23 moreover, we are now even more aware than in the past that with international currency status come greater responsibilities and challenges at the international and domestic level. at the international level, one challenge is about global liquidity risk. for instance, central banks in major advanced economies have been called upon by emerging markets to establish a structured network of currency swap agreements to mitigate the risks of international currency liquidity shortages. such agreements are however possible to the