also update our risk assessment. even now, 2 / 5 bis - central bankers'speeches it seems clear that the recent events in the middle east – terrible events – have increased the uncertainty of the medium - term outlook. overall, during the last few months, inflation in the euro area has fallen significantly. in october, the headline inflation rate slowed to 2. 9 %. this is encouraging. nevertheless, while the inflation curve currently looks a bit like the matterhorn – or, as it is called in italy, monte cervino – i do not expect this steep decline to continue over the coming months. statistical effects, particularly base effects, are currently exerting a strong influence on the monthly data. events that happened twelve months ago are having an impact on the year - on - year rate of inflation. even if energy prices remain where they are, i expect the inflation rate to rise again somewhat. for some months to come, the road ahead will probably be a bumpy one with many ups and downs. indicators of underlying inflation show that its dynamic is still quite strong. for example, in october, core inflation stood at 4. 2 %. this is the inflation rate excluding energy and food. in other words, now that the disinflationary effect of lower energy prices has faded away, we are faced with the most difficult part of our journey forward. that is to say, our job is not done yet. in particular, it would be a mistake to loosen our monetary policy stance too early. premature easing would jeopardise the timely return of inflation to our target of 2 %. and this timely return is important for keeping medium - to - long - term inflation expectations anchored at levels consistent with price stability. if our actions raise doubts about our determination, economic agents will increasingly expect inflation rates to persist above target and will adapt their behaviour accordingly. their price - setting behaviour or their wage demands, for example. now we need the patience to wait for the full effect of policy tightening on inflation to materialise. we expect the main effect on inflation to take hold in 2024. this is due to the time lag of monetary policy transmission. in any case, we must maintain our current restrictive policy stance until we are certain that price stability will return on a lasting basis. 3. 2 price stability is our guiding star one reason why the final mile on the road to price stability is considered to be the toughest is the growing public opposition to a restrictive monetary stance

hermann remsperger : money in an uncertain world speech by dr hermann remsperger, member of the executive board of the deutsche bundesbank, at a dinner speech, bundesbank and university of bonn workshop, eltville, 27 - 28 october 2005. * * * ladies and gentleman, it is a pleasure for me to speak to you this evening on the role of money in an uncertain world. of course, the challenge of making decisions under different forms of uncertainties does not only apply to the conduct of monetary policy. on the contrary, model and parameter uncertainty, data uncertainty and shock uncertainty are present in many areas of our everyday life. as an example, take medical science. on the one side you could argue that doctors know more about the working of the human body than economists know about the functioning of the economy. but on the other side there is also no doubt that certain health problems are not entirely understood. at least it is a fact that you very often get different opinions about how certain health problems ought to be treated. uncertainty and monetary policy decision making well, before i become too much involved in health care, let me get back to those uncertainties with which we are confronted as central bankers. here, the package insert or the instructions at our disposal is the stock of economic research. all the different types of uncertainty have been picked up by academic literature. however, while the literature usually focuses on only one sort of uncertainty at a time, we face all of them simultaneously. i will focus on two of them, one is model uncertainty and the other data uncertainty. given the overall topic of this work - shop, i would like to convey the key message of my talk without any further delay : the analysis of monetary aggregates can play and should play an important role to cope with these two challenges. model uncertainty and money as central bankers we need models to structure our thoughts and to estimate the impact of our decisions. however, there is no consensus about which model is the appropriate representation of the real world. as a consequence, most central banks – including the ecb – use a wide range of models. but with such a variety of models, the problem of setting the appropriate monetary policy stance becomes a very difficult task. i think that ben mccallum is perfectly right in that the preferred policy rule should be one that works ‘ reasonably well in a variety of plausible quantitative models ’. 1 by the way, this approach can also be applied to the discussion whether monetary