the momentum toward achieving the price stability target of 2 percent is maintained but is not yet sufficiently firm, and thus developments in prices continue to warrant careful attention. ii. conduct of monetary policy next, i will explain the bank ’ s conduct of monetary policy. the bank has been conducting powerful monetary easing under the framework of “ quantitative and qualitative monetary easing ( qqe ) with yield curve control ” introduced in september 2016. in terms of yield curve control, with a view to facilitating the formation of the yield curve that is considered most appropriate for achieving the price stability target of 2 percent, the bank has conducted purchases of japanese government bonds ( jgbs ) under the guideline for market 1 / 2 bis central bankers'speeches operations, in which it sets the short - term policy interest rate at minus 0. 1 percent and the target level of 10 - year jgb yields at around zero percent. at the july monetary policy meeting ( mpm ), with a view to persistently continuing with such powerful monetary easing, the bank decided to strengthen the current policy framework. first, the bank introduced forward guidance for policy rates, with which it intended to maintain the current extremely low levels of short - and long - term interest rates for an extended period of time. this aims to clarify the policy stance of continuing with powerful monetary easing by making clear future policy rates in advance. second, the bank decided to conduct market operations and asset purchases in a more flexible manner. as the degree of market functioning consequently improves, such as through interest rate formation becoming more flexible, this likely will lead to enhancing the sustainability of the policy. the bank deems that such policy responses will lead to achieving 2 percent inflation at the earliest possible time while securing stability in economic and financial conditions. it will continue to examine the risks considered most relevant to the conduct of monetary policy and conduct its policy in an appropriate manner, taking account of developments in economic activity and prices as well as financial conditions. thank you. 2 / 2 bis central bankers'speeches

future inflation will always be at odds with reality. criticising economists for thinking that their models replace what actually happens in the real world may be satisfying, but it is also off - key. by the same token, placing complete faith in an economic forecast or model is equally unhelpful, as we know that no model can fully capture the complex relationships we find in the real world. therefore models should never be used mechanistically. forecast errors thomas kida is a professor at the isenberg school of management at the university of massachusetts. bis central bankers ’ speeches cannot tell us anything useful about financial and economic panic and crashes unless the models on which they are based account for the build up of imbalances that become unsustainable. clearly, the conditions for sustainability also need to be included. for example, the ability of greece to manage its current debt load differs depending on how fast the greek economy can grow. the mistake was to allow so much of the global community, especially the financial markets and policy makers, to rely on economic analysis that placed little emphasis on structural factors and balance sheets and which ignored the herd behaviour occurring in financial markets. it was not a model of real estate prices that failed to see the absurdity of ever - rising prices in the us housing market, but the assessment of the bull market in property by many, often famous, economists. so how might we think about dealing with this problem of economic models and forecasting that will be by definition insufficient and, in fact, wrong, and the need for robust and useful economic analysis both of what models tell us and what they don ’ t? certainly part of the answer lies in making progress with developing models that are useful in the appropriate contexts. for the reserve bank, a major step forward in modelling came with the implementation of the inflation targeting monetary policy framework in 2000. more accurate modelling and forecasting activities were ( and are ) required for inflation targeting, and the research department of the bank set up a so - called “ suite of models ”. this ranges from single equation, high frequency data models to longer - term structural multivariate models, and also varies according to the combination of economic theory and statistical techniques applied. 2 it is useful to supplement the forecasts from structural models with information obtained from higher frequency models to establish the starting point for the forecast trajectory. this approach allows the forecasters to optimise the positive characteristics of a particular model type and use the different approaches to improve the trajectory