implies the public announcement of a quantified definition of the final objective of price stability ; for instance, the banque de france aims at an inflation rate not exceeding 2 % ; • thirdly, the strategy should be based on a forward - looking approach. this is because the transmission of monetary policy decisions to the economy takes place with relatively long lags. estimates of these lags between interest rate changes and their effects on inflation vary between one and two years. as a consequence, central banks have to look ahead before they take monetary policy decisions. a case in point was the recent decision by several continental central banks, including the banque de france, to raise their main refinancing rates on 9th october. this move was justified by the need to pre - empt inflationary pressures early enough, although current inflation remained low. in my view it is very important to make the public aware of the concept of the “ pre - emptive strike ”, which is at the heart of central banking. 1. 2. intermediate target : more arguments in favour of monetary targeting, with a caveat in order to provide an anchor to inflation expectations and to look ahead, central banks make public an intermediate target which they commit themselves to respecting. announcing an intermediate target also enhances the accountability of the central bank. this is why article 12 of the statute of the ecb explicitly refers to decisions relating to intermediate monetary objectives as one of the main responsibilities of the governing council of the ecb. two possible strategies have been selected by the emi council as potential candidates to be recommended to the ecb, namely monetary targeting and direct inflation targeting. 2 in the case of direct inflation targeting, the inflation forecast made by the central bank can be viewed as fulfilling the role of the intermediate target. 3 let me dwell a moment on the choice the ecb will have to make between direct inflation targeting and monetary targeting, unless it chooses to combine elements of both strategies. inflation targeting stresses the responsibility of the escb for achieving and maintaining price stability. however, there are some difficulties in the process of forecasting inflation over the medium and longer term. as mervyn king recently stated, “ such a forecast cannot be a single number. it must be presented for what it is, namely a probability distribution ”. 4 furthermore, inflation targeting could imply more formal cooperation with the government since the latter is in a position to influence price developments. finally, inflation targeting has admittedly proven useful in progressing towards price stability, as

expected and is reasonable. we cannot ask banks to generate a double - digit return on equity when interest rates and the risk - free rate are so low and banks are indeed more resilient than they were. moreover, this improvement does not only concern the banks : it can also be seen in the non - banking sector and the financial markets, with particular progress made with regard to over - the - counter derivatives and the shadow banking system. regarding the economic consequences of the reforms, it is important first to remember the cost of the financial crisis : according to imf data, the total loss of global output from 2007 to 2014 amounts to 25 %. compared to this considerable loss, the potential cost of financial regulation is very small. and above all, no one can seriously claim that in france or more generally in the majority of advanced economies the supply of credit has been excessively constrained by banking regulations. on the contrary, lending to the economy remains robust, with housing loans in france up 5. 6 % year - on - year in april 2017 and loans to non - financial corporations up 5. 4 %. in the coming months, this strong overall growth may actually warrant general vigilance and closer scrutiny by the high council for financial stability, in which i participate. 1 / 3 bis central bankers'speeches * * * ii. nevertheless, we are still faced with a challenge for the future, which brings me to my second point : even if the achievement is now on solid foundations, there is clearly no room today for complacency or respite. although the risks of a future crisis have diminished, no one should believe that they have disappeared entirely. so what measures are required? for banks, the priority is to stabilise the regulatory framework and therefore we must finalise basel iii. here, it is useful to remember that, essentially – let ’ s say approximately 80 % – basel iii was already completed in 2011. in addition, there is now a broad consensus on risk measurement approaches. the main point that is still undecided and which continues to occupy the committee members is the setting of the so - called “ output floor ” for banks that apply internal models. let ’ s be clear : i read and hear the banking industry, and french banks in particular, giving its advice for negotiations on this point. a little restraint would not go amiss, and it is not our intention to defend corporate interests. if an output floor of 75 % is not acceptable, it