1939 concept of “ secular stagnation ” with interest rates staying permanently at lower levels and economic activity remaining subdued. there are many such examples. for instance, our imperfect understanding of the current slope of the phillips curve and the trends in productivity is one of the reasons why the ecb has been reluctant to complement its forward guidance with numerical triggers. i do not share this pessimism but i think it is of great importance to understand to what extent this development is driven by long - term forces, such as demographic changes or lower potential growth, and to what extent it is driven by medium - term forces, such as changes in risk aversion and the perceptions of macroeconomic risks in the wake of the recent crisis. frictions and rationality institutional details and frictions, both on the side of market participants and regulatory institutions, have an impact which is difficult to detect in normal periods. interbank markets, for instance, used to be seen by academics as a somewhat dull topic before the crisis, so that little was known about their functioning. both in europe and in the united states, they have been at the centre of recent policy debates, generating a welcome crop of new research, to which mars has been contributing. the dominant “ rational expectations ” modelling paradigm in economic research postulates strong assumptions about human decision - making, implying, for instance, that economic agents are always able to assign sensible probabilities to alternative outcomes. clearly, this characterisation of human decision - making stands in stark contrast to our own recent experience. we need to understand how panics and bubbles can emerge from psychological biases. the nobel prize co - awarded to robert shiller last year will certainly encourage more research in this direction. while much progress has been made on studying notions such as knightian uncertainty, sentiment, confidence or sunspots, more work is probably needed before they can be part of our standard modelling toolbox. a challenge is of course to come up with tested and robust behavioural theories. another important departure from rationality that is of key practical concern is how simple behavioural rules adopted by market participants in normal times can lead to entirely different outcomes or even to market meltdowns in crisis periods. agent - based models are a promising way to look at these problems, but they need to be developed in close cooperation with practitioners and policy - makers to take the proper behavioural rules as inputs. on both issues, what policy - makers need above all is more work integrating these approaches into richer

i said, we went really deep into the analysis of the labour market and tried to really understand the forces behind inflation to better fight it. it was a very, very broad consensus. by the way, i just want to remind that it was a twofold decision. it was, number one, the 25 basis points but it was also the decision, or the confirmation, that we would stop any reinvestment under the app. what does the ecb know about lag effects? what takes longer to transmit into the economy? what are you looking at more closely? the second question, about your targets. according to projections you do not expect to reach the inflation target in the next three years. some economists suggest that this target 6 / 10 bis - central bankers'speeches is no longer valid, that 3 % will be the new 2 %. what do you have to say about that? we have a target. we have agreed on the target. we are in the middle of that fight against inflation and this is what we know. we're going to get to that 2 % and we're going to reduce it to 2 %. what happens next is another story, but we want to be at target and we want to be confident that it remains at target. so, the two elements are going to really drive our monetary policy going forward. on the lag time : we know that there is lag time, that the decisions that we have made in the last soon - to - be - a - year – which are monumental, by all accounts, both in terms of speed, in terms of height, volume of hikes, if you will, and we are seeing some effects. we are seeing it in market rates. we are seeing it in banking, financing. we are seeing it in credit, both in volumes and in rates. there is some lag time – not that much by textbook standards, which will typically say that it's anywhere between 18 and 24 months, maybe a bit more. but because it is so unprecedented and such an exceptional situation, we really have to monitor that very carefully. whether it is going to be faster, whether it is going to be a bit more slow because there has been variation in the terms of loans, for instance, to both corporates and mortgages and therefore the transmission is not operating as smoothly as it would if everything was at floating rates. all of that we are looking at extremely carefully to measure the transmission