 Now we're here at the ECB Forum on Central Banking and every year it's very clear that Cintra really dominates the attention of investors but not every year is like this one. Now for one it's not I'm told quite as windy as it was yesterday but that of course is not what makes this year so special and so unique. We're entering a new chapter for monetary policy and divergence for almost 15 years of policy experimentation in an age really defined by stubbornly low inflation. Now this year that has changed. As Claire was saying our policy panel needs a little introduction but I'm going to do it anyway. Jerome Powell is the chair of the US Federal Reserve, Andrew Bailey governor of the Bank of England, Augustine Carstens governed the Bank of Mexico before becoming general manager of the Bank for International Settlements and of course our host the president of the ECB Christine Lagar. Now just a reminder between them these institutions hold nearly 20 trillion dollars worth of assets on their balance sheet and they've of course maintained ultra low even negative interest rates for the better part of a decade with little disruption. They now have the unenviable position of presiding over the great unwinding of policy that may have permanently changed the architecture of global markets. So thank you all for joining us we're going to have I'm sure a robust discussion over the next 90 minutes. Mr. Carstens let me start with you as a central bank of central banks. Central banks in general have faced really a succession of crises over the past years but also some of the structural factors such as the green transition, digitalization and increased on-shoring. So how different will the future of inflation be from now on? How different will it be from the last decade? Well I mean a very important change that has taken place in the last I would say two decades or even more if for example we compare this period of inflation with the 70s is that we have much stronger institutional frame monetary frameworks and institutional framework for central banks and I think they are far better positioned to combat inflation. If we go back 70s and 70s have become a natural reference we were at the time where for example the Bretton Woods was failing. You don't have more I would say instability in a system when you are for example revising your exchange rate regimes and that is not happening today. I think that the period of this inflation there established very very strong bases to create new and more nimble more agile better prepared central banks. And I think for example the design of the ECB our host here today in a way incorporated many of those learnings. So I mean when you are in charge of combating inflation what you need to be able to anticipate is that sometimes you will be surprised because there are many elements that affect inflation and that they are not directly under your control. And I think to a large extent this is what we are seeing today. And I see a very very strong ability of all central banks to analyze to incorporate that information and to react. For me if you look very careful what is going on right now. In the last two years we have seen dramatic changes in the environment. We went from having a situation where depression was feared, the inflation was coming to a very quick rebound with the vaccination and so on and so forth. And we moved tremendously quickly from an environment of fearing deflation to fearing inflation. And that has been compounded by the Russian crisis. I have to say monetary policy as nimble as it can be cannot respond with that with that with that celerity. So I think that the knowledge of the new form of inflation is being learned and it's being responded. So I'm very positive that this institutional framework and strength of central banks today will take us to the goal where we want to be relatively soon. Chair Powell do you agree when you look at complexity and uncertainty has it always been this way but we forget about it or is this really a new frontier? I agree with everything Augustine said about institutional progress. But I would say I would add this. We've lived through a period of disinflationary forces around the world. This is globalization, aging demographics, low productivity, technology enabling all of that. And that was so we've been in that world where inflation was really not a problem in most of the advanced economies most of the time. Since the pandemic we've been living in a world where the economy is being driven by very different forces. And we know that. What we don't know is whether we'll be going back to something that looks more like or a little bit like what we had before. We suspect that it will be kind of a blend. But in the meantime we've had a series of supply shocks. We've had very high inflation now across the world certainly through all the advanced economies and to Augustine's point we're learning to deal with it. Our job is to find price stability and maximum employment in the case of the Fed in this new economy with these new forces. And it is a very different exercise than the one that we've had for the last 25 years. Nonetheless the goals are the same. So I don't know whether, Madame and I, after this volatility do we go back to something that resembles a lost 10 years or is it something else completely? I also agree with most of the points that Augustine made and we don't have to agree between us because we always do. But I don't think that we're going to go back to that environment of low inflation. And I think that there are forces that have been unleashed as a result of the pandemic, as a result of this massive geopolitical shock that we are facing now that are going to change the picture and the landscape within which we operate. If I look at our euro area, for instance, we have record low unemployment. We have inflation expectations, however imprecise and with the pinch of salt that was discussed at the last panel, which was excellent, we have inflation expectations that are much, much higher than they were. That's for the internal matters. But if you look at the rest of the world, a lot of the movements that we've experienced in the last 20 years was predicated on globalization, on the breaking down of supply chains, on the reduction of cost, on the just on time. That has changed and will probably change continuously towards a system that we are not certain about at this point in time, which is much debated. Some would argue that globalization will continue in a different format. Some would argue that the place where you manufacture, the place from which you provide services is going to be determined by different factors than just cost. It will be about cost as usual, but it's also going to be about where do I locate my services, where do I employ people, where do I reduce my costs, and are those areas, geographical as well as political, actually foes of friends and do I have some predictability about the future of my production or the providing of my services. The third factor that is going to change the scene from my vintage point is the way in which we produce. And I think that the shift that we're observing in Europe, certainly, towards green transition is also going to change dramatically the way in which we operate. And all those forces are going to produce inflation, deflationary impact that are still to be measured. But in the short run, I have some ideas as to where it's heading. And we'll get back to those ideas shortly. Do you see this as a sea change for the longer term future? Yes, I do. I mean, I think, first of all, we have to say that unquestionably, of course, our task is to return to low inflation. But I think when we see this every day that in fulfilling that task, we're observing certainly what can turn out to be structural change, and some of it I think I would say is already getting there. So I think COVID is leaving a structural legacy on labour markets and the way they behave, which we're already beginning to see. I mean, I think, sadly, the European security situation has changed. We hope it obviously doesn't persist, but it has changed. And that's affecting, as Christine was saying, that's affecting supply chains. It's affecting the resilience of the whole supply system. And you mentioned climate change, Francine. I mean, I would say that this is not, because some people sometimes say, it's not some sort of dilettante activity about central banks. The reason that we're not in the lead on it, clearly, but the reason we have to take it seriously is because it is affecting our world. And actually, it will get worse. I mean, that's the sad fact of life. And we have to, in a sense, understand that and understand what effects it will have and how we respond to it. So these structural changes are very important in our landscape. Chair Powell, as these complexities or as these sands are shifting, is slower growth, much slower growth, an inevitable trade-off on trying to deal with inflation? So I would say that if what we see, for example, is the re-division of the world into competing geopolitical and economic camps and a reversal of globalization, that certainly sounds like lower productivity and lower growth. And in many parts of this side of that, you see aging demographics, so a shrinking workforce, and you see economies that are growing more slowly and whose workforces are not expanding. So that's certainly a possible outcome, and I think probably, to some extent, a likely outcome. And in the shorter term, can the US economy actually deal with a possible onslaught of interest rate hikes? So the US economy is actually in pretty strong shape. So if you look back a year, the US economy grew more than 5.5%. It was really the big reopening year, and so we had expected this year to be that growth would moderate to a more sustainable path. We also, of course, are raising interest rates, and the aim of that is to slow growth down so that supply will have a chance to catch up. We hope that growth can still remain positive. So if you look at the strength of the economy, households are in very strong financial shape. They've still got a lot of excess savings from forced saving, from not being able to travel and things like that, and also from fiscal transfers. So households are overall, not every household, and not the ones at the lower end of the income spectrum, but overall in strong shape. The same thing is true of businesses, very, very low rates of default and things like that, lots of cash on the balance sheet. The labor market is tremendously strong, still averaging very, very high job growth per month. So overall the U.S. economies is well positioned to withstand tighter monetary policy, we think. But is it automatically a trade-off between fighting inflation or taking care of the economy, and how far are you willing to go with interest rate hikes? So I guess I'd say it this way. Our aim is to have growth moderate. It's sort of a necessary adjustment that needs to happen so that, again, supply can catch up. It could be supply of workers. It could be time for the supply chains to improve. So the sense of that is that if we can get, right now, supply and demand are really out of balance in many parts of the U.S. economy. Labor market being a big example of that. We need to get them better in balance so that inflation can come down. And that's the aim of what we're doing. Now, we don't have precision tools, obviously, monetary policy, famously a blunt tool. That is our aim, that is our intention. We think that there are pathways for us to achieve that, to achieve the path back to 2% inflation while still sustaining a strong labor market. We believe we can do that. That is our aim. There's no guarantee that we can do that. It's obviously something that's going to be quite challenging. And I would also say that the events of the last few months have made it significantly more challenging, thinking there particularly of the war in Ukraine, which has added tremendously to inflationary pressures around food and energy commodities and agricultural chemicals and industrial chemicals and things like that. It's gotten harder, the pathways have gotten narrower. Nonetheless, that is our aim, and we believe that there are pathways to achieve that. President Leger, can you talk to us about this fine balancing act for Europe and what that means? You know what I find extraordinary is that 10, 15 minutes into this debate, we haven't really used the word energy. And certainly in this part of the world, the energy shock that we have suffered are suffering and probably will continue to suffer has had a major impact. And I think this is not specific to Europe, but there is certainly a dependency of European countries and the Euro area is certainly a point in case to external supply from foes. And that has had a major impact on prices. It is certainly a very driving force, a strong driving force of the inflation that we have experienced in the last few months. This has been, as you said, exacerbated by the war. And I think the proximity of Europe relative to the war scene has had probably a more significant impact on the price, both of energy and of food, which are clearly very important components to take into account, including in inflation expectations, as was discussed earlier. But we also have from that end is a series of supply shocks that are heating the European economy. But we also have this recovery that is very much underway that is certainly driven by services because of the swing that we've observed from goods to services, and which is also supporting the economy. We have very low unemployment numbers, high employment participation. Some of it is more attributable to public service jobs than private sector, although that is also back to pre-pandemic moments. And we have a couple of other items, such as significant savings that are still to be used, hopefully, or not. And we have fiscal policy. And the fiscal policy that we are seeing at the moment is roughly in the range of 1% GDP. But we need to see how fiscal authorities move where they move, and we certainly hope that they will move in a targeted, temporary way in order to make sure that they support the most vulnerable and not in a broad and discriminated fashion, as we have unfortunately observed so far. Why do you prefer actually the more gradual approach? So yesterday you retreated 25 basis points high. Gradual, for monetary policy? For monetary policy. Well, don't forget, I didn't say gradual full stop. I said gradual, but optional. And I think it's a combination of the two that actually matters for us. Moving gradually is certainly appropriate in times of very high uncertainty, but as the uncertainty will clear on various accounts, we will have to certainly be less gradual and give more way to optionality. But we have both of them in combination at the moment, optionality is being also a very critical aspect of our determination. Mr. Karsan, you've been pretty vocal, actually, on what central banks should do. Do you think they need to cut faster? Well, I mean, I think everyone should react according to their own circumstances. What is very satisfactory at this stage is that pretty much all central banks have starting address the issues. I mean, one way of dealing with this, of it, is through words, to recognizing you have a problem, to saying that you will address it, and pretty much all have already entered into the field of action. So central banks have been acting in consequence. I have to say the level of interest rates worldwide have adjusted. The level of interest rates, if you look them from the yield curves, they have been increasing quite substantially. What we can say is that global financial conditions have tightened substantially because we shouldn't forget that this, in a way, has become a global phenomenon. I mean, inflation around the world has been increasing. Now, each country, as Christine and Andrew and Jay has been saying, each one face different dynamics of inflation. I mean, in a way, I think what is very, very important is that in the realm of their own economies, what they should try to do is, at some point, prevent a full transition from a low inflation environment to a high inflation environment where this high inflation gets entrenched. And for that, basically, you need to prevent these vicious cycles to kick in. And pretty much all of them are addressing it. In these vicious cycles, labor markets are very important. And labor markets are very different across the world. Therefore, I think that there is no one recipe or no one remedy for all. But what I'm seeing is that pretty much all central banks have been addressing this issue in a forceful, determined way according to their own circumstances. Mr. Custon, does it mean that you would be in favor of front-loading hikes so that it's a powerful message maybe for a lot of the citizens? Well, let me give you a good example. And to introduce a little bit of a different flavor here, I come from emerging markets. And if you see how emerging markets have been acting this time around compared to other periods of very high interest rate increases in advanced economies or the expectations of fast increases in interest rates, they have acted quite well. I mean, if you see, the most recent episode was the temper tantrum, where many emerging markets suffered dramatically with the expectation of higher interest rates. My own country, Mexico, several of our crisis have been associated with rapid increases in US interest rates. But we have learned our lesson. And so what you see is emerging markets traditionally were the ones who would increase interest rates at the very end. Now they started very early on. And what you can see is that they have managed to keep their exchange rates quite stable. Traditionally, an emerging markets exchange rates was a very important source of inflation. So now they're still facing the sources of inflation from the commodity shocks, from energy, from world aggregate demand, but not the ones that could have been inflicted by their movement in the exchange rate. So there you see that different central banks can act at a different pace. For them, it really was critical to act forcefully and very early on in the game. But that's not the circumstances you see around. So I mean, I would say that each central bank is playing its own game because it's different circumstances. Governor Bailey, does the guidance from the BOE on moving forcefully actually opened the door for 15 basis points? Well, I think the way I would frame that very much goes back to what the others have been saying. And as Christine was saying, we are being hit by a very large national real income shock, which is coming from outside. There is uncertainty around two parts of that in terms of monetary policy. One is, of course, the eventual scale of it, because it's unfortunately still evolving. Secondly, the impact of it, precisely how it passes through into the economy and what the effects of it are. But the scale of the shock is very substantial. And in and of itself, it will have an effect, a big effect, because it will reduce domestic demand and it will pass through into labor market and it will pass through into inflation. Monetary policy has, of course, a very important role to play because it will act alongside that shock. And it's very important, as we said, and this is where we come to the language that we use. And it, of course, is it is there also to tackle the second round effects as they come through price setting and wage setting. So the message that we gave and was in the language of our last meeting, as you rightly said, was that if we see greater persistence of inflation, that's second round effects, then we will act more forcefully and we will have to act more forcefully. Now, in terms of your precise question, what does that mean? Well, of course, I'm not going to say what it means at our next meeting, because our next meeting is still a month away, a lot will happen between then. What I would say to you is that, of course, it leaves options on the table and that's very deliberate, very deliberate. I mean, I want people to take a message away from that. It's quite clear that as we respond to this shock, we want to have those options on the table for precisely the reason that Agassin has just said. There will be circumstances in which we will have to do more. We're not there yet in terms of the next meeting, we're still a month away, but that's on the table. But you shouldn't assume it's the only thing on the table. That's the key point. But, Governor, for you personally, would you be leading towards 50 basis points? No, because I'm going to see what happens in the next month. I'm afraid one thing that is omnipresent in our system is that we make policy meeting by meeting. And there's always another meeting. If you can only guarantee one thing in March, your policy is that there's another meeting. Yeah, is it actually annoying that markets or reporters always try and understand some of this very personal thinking on interpretation, for example, Chair J. Powell. I mean, I tried my luck with Governor Bailey, but how should we be thinking about this? Are markets or reporters trying to really always get just that nugget piece of news? Yes, well, certainly there's a lot of that going on, I would say. But no, I guess to put a more constructive spin on it, the markets and market participants are always wondering what we're going to do. They're always wondering what we're thinking. And when market moves happen, that's really a constructive thing. It's never going to be exactly what we're thinking. But nonetheless, it's constructive that the market, in effect, is doing your work for you if it correctly understands your reaction function. So that's maybe a more constructive way to talk about it. And is it correctly understanding what you're saying right now? So I would say, by and large, I think over since last fall, when we pivoted to raise rates and get where we are now, since then, markets have been pretty well aligned. I wouldn't bless any particular day, for example, but pretty well aligned with where we're going. And right now, the market pricing is pretty close to where the summary of economic projections from what was it two weeks ago was. So my colleagues and I wrote down numbers for the end of this year for our policy rate between 3 and 3 and 1 half percent. And markets are broadly right in that space somewhere. And then for next year, between 3 and 1 half and 4%. So broadly speaking, I think it's working. And everything we say in terms of forward guidance, to your point, is always going to be conditional on the things that happen between now when you give the guidance and when the actual event happens. And sometimes markets can forget about the conditionality part. But is there a problem actually with forward guidance in this kind of environment? Because it gets priced in straight away. So it feels sometimes like markets lead and central banks follow because of the forward guidance. It doesn't really feel that way at all from where I'm sitting. It feels quite the opposite. And as I said, I think people will look back on this period and say that we were able to have financial conditions tighten quite substantially. And we've only had three meetings at which we raised rates. Nonetheless, the forward rate curve is pricing in a rate path that looks a whole lot like the summary of economic projections that my colleagues and I submitted in June. So that's a good thing. That's the market understanding and finding credible what we're writing down. Of course, it's all highly conditional. But nonetheless, I'd say that's a positive thing. Do you agree, Madam McGann? Is it a positive? Yeah. Well, I would agree. From our vantage point, we are on a normalization path. We have signaled that very clearly. We've started that back in December. And the key assessment is the assessment of the medium-term outlook. The variables that we look at, the data that we look at, I think everyone is aware of that. And most people operate on the basis of the same data, the same information. And I think that our reaction function is what matters. And as long as that is understood, the fact that we are on this normalization path, that we are gradual but optional, that we're going to be data dependent. We've indicated very clearly what's likely to happen in July. Well, yes. What's likely to happen in September? Yes. And in the path that we are on, I think that markets have full understanding and appreciation of what we are doing, how we're doing it. And then the level of uncertainty, as it clears, will probably help us towards this optionality that I was describing earlier on. Governor Beall, again, do you agree, actually, with the market function so far, as they broadly understood what the central bank's trying to do? Yes. I think they have. I think the tricky thing that you see certainly, I would say we see as that we can obviously see direct market pricing, an implied market curve, which prices in what we're going to do. We also, as you probably know, and we just started doing this recently, publish a market survey at the same time as the meetings. And that actually shows a lower path of rates. So we spend quite a bit of time understanding the difference between those two. I don't think it's actually hard to explain, because I think the underlying reason is that the market curve prices in the risk. And the risk is on the upside. And I would agree with that. So whereas the survey is a straightforward point number, the curve has got the risk in it. So I think, for me, the best way to look at that difference is the risk. But that is a risk in that sense. It's important to see that perspective. Mr. Ruff, I want to get ahead of ourselves or to become bigheaded about it. But there's a point that was made in a previous panel, which we all agreed over lunch, which is that it's not a science what we're doing. There's an element of art. I don't know whether you characterize it as art or not. But it is not just driven by sciences. And we know that models have had their shortfalls, particularly turning points. So there is also that element that is sort of privy to the deliberations that we have in our various governing councils and FMC's and what have you. Yeah. Yes. Can I just add, we're talking a lot about markets and how we react to markets, actually, to Christine's point. The way we're thinking about it is, what policy setting do we need to put down to achieve the real economy goals that we're working on? And that's what our, we're not thinking, well, let's try to match up with the markets. What's the right policy based on the incoming data and the evolving outlook and all those things that will get us to 2% inflation while ideally keeping the labor market strong? So it's really, we're talking so much about markets, I wouldn't want people to think that that's actually what we're aiming for. We still have an hour on the panel. So we have time. Is there a piece of the, I mean, do you worry about yield curve inversion, though? Is there a piece of that that makes you worry? Or do you just, you know? So we, I would say this. We monitor a broad range of financial conditions. Honestly, the shape of the yield curve is not a top line worry for right now. Our focus is very intensely on conceding policy in order to get inflation down to 2%. That's what we're working on. That's our, we understand that that's our primary focus right now. The labor market, of course, is extremely tight in the United States. So we, so our focus is getting inflation under control. It's, and it's very important that people understand how committed we are to doing that. And that, again, that's what we're thinking about. Yeah, and I want to go back to the real economy and inflation a second. But Mr. Carson, what do you make of some of the, you know, what we've seen in market volatility? Is it, is it just a readjustment? Is it a misunderstanding? Is there something that, you know, could turn uglier? Well, you know, markets are responding also to the circumstances. I think as policy makers to some extent have been surprised because there has been news that really are news and that were very difficult to anticipate. Markets are doing the same. And we have to, and you know this very well, markets are turning around very big positions. They're adjusting their portfolios. We're talking about the circumstance where for very, very long period of time we had tailwinds in the bond markets. You know, we had very low and falling real rates of interest, falling nominal interest rates. So trading bonds was relatively simple. We had very big expectations for earnings into the future. A lot of interest in different sectors of the economy. Therefore, it was easy sailing for quite some time. But you know, the world has changed. The world that investors are facing and the world that we are facing. And central banks need to do their work, not as an objective in itself, but as all these central bankers have been saying to fix a problem which is inflation and then continue a much better world moving forward. So there are certain circumstances in markets where frictions are bigger. Trading conditions are not always the same. I mean, you get circumstances of crowded trades because at some point the same type of investors are trying to do the same operation and liquidity is not necessarily there. Something that for me has been very positive is that central banks, the leading central banks have been able to implement their money policy adjustments without really generating any sort of market disruptions. Markets have been performing well, liquidity is there, market making is going forward. Yes, there has been some disruptions. I'm not talking about the cyber world, that's another fish, or how do you say it, another kettle of fish. But you know, I think that the markets have been working really well. And yes, behind the actions of central bank, there is always the concern that markets should be working adequately because you don't want to have financial instability. At the same time, you need markets working well for the transmission of monetary policy. And so far, I would say so good. Yeah, but at what point, and I think that maybe the last point on markets is how much do central banks seem to deal with markets, Mr. Carson, to see, to I guess impact the real economy? That's for real. How much do we deal with them? I'm sorry. Yeah, I mean, how much do you need to focus on markets to make sure that also the real economy is quite strong? Well, I mean, we spend a lot of time analyzing markets, and all of that is fed into what impact those changes have on the inflation outlook. I mean, that's why we do it. With the second, well, with the second objective, as Christine rightly says, of course, about market stability, because after all, we've also got financial stability obligations and responsibilities. I mean, I think if I go back to the panel this morning that we briefly, I think the point was rightly made that it's turning points that are the hardest often to read, and it's not just for us, it's for markets as well. And I think certainly when I look at the UK economy at the moment, it's very clear that the economy is now starting to slow. We are at something of a turning point in that respect. And I think the fact that markets are having to take that on board and that the data can be quite choppy at that point in time is reflected in some of the short-run movements in markets. Now, I do think one of the essential things for central banks is to look through that short-run. We have to extract the information and then look through it, because obviously our objectives are much further forward in that sense in terms of low inflation and returning to target. But in terms of taking the information out of markets, yeah, it's a very important activity for us. Chair Powell, Paul Krugman, I think on Friday said that the number one risk to the US economy is that the Fed could overdo it because inflation could come down as quickly as it went up. Is that really possible? Well, we'd certainly welcome inflation coming down more quickly than expected. And we would take that into account in our policy. So look, as I mentioned earlier, we're very strongly committed to using our tools to get inflation to come down. The way to do that is to slow down growth, ideally keep it positive. And as I mentioned, supply and demand get back into balance. So that's what we're trying to accomplish. Is there a risk that we would go too far? Certainly there's a risk. But I wouldn't agree that it's the biggest risk to the economy. And the bigger mistake to make, let's put it that way, would be to fail to restore price stability. And to what Augustine was speaking to earlier, a low inflation environment or regime is what we've had. That is one in which inflation is low and no one pays any attention to inflation. And that's called rational inattention because it doesn't matter. When there's a big inflation spike, if it's going to go away, we would ignore it and play through it because it'll go away and it won't affect people's understanding. But to the extent there are a series of shocks, it does become rational for people to pay more and more attention. And I think the clock is kind of running on how long will you remain in a low inflation regime where most of the changes in inflation are actually idiosyncratic as opposed to broadly across the macroeconomy. So the risk is that because of a multiplicity of shocks, you start to transition into a higher inflation regime and our job is literally to prevent that from happening and we will prevent that from happening. We will not allow a transition from a low inflation environment into a high inflation environment. Is there a point where actually the inflation expectations get de-anchored? That's another way of saying it or thinking about it. It's the same thing, same idea. And the thing is you never really know. There's no way to know in real time. We all study inflation expectations very carefully. And if you look across the broad scope of short, medium, and long-term expectation, you'd still say that we have credibility, that they're well-anchored. But there's a clock running here where we have high inflation running now for more than a year. And no one should assume, it would be bad risk management to just assume that those longer term inflation expectations will remain anchored indefinitely in the face of persistent high inflation. So we're not doing that. As a risk management matter, we're working very hard on the part that we can affect, which is the demand side. We can affect the supply side, really. But we can affect the large parts of the U.S. economy where there's surplus demand, and that's really our focus. Is there a data point that you watch forward to actually see whether there is a de-anchoring, or where do you see it first, basically, if it spirals? The point is not to see it at all. Once we start seeing that, the cost of dealing with higher inflation goes up so much to the extent you find yourself in a higher inflation regime that you just can't allow it to happen. So if you're starting to see serious de-anchoring of, and we're not, of longer term inflation expectations, then you're behind. And I think right now we're doing what we need to do, which is to move expeditiously and into restrictive territory fairly quickly. I think that's what we need to be doing so that we don't find ourselves in that situation. President Lagarde, what's the situation like in Europe? We had a pretty ugly CPI number from Spain this morning. Yeah, numbers from Germany that are below what economists expected. So I think it's a question of waiting until the first of July when we have the consolidated number for the whole of the Euro area, and we'll see because we are data dependent. But just like Jay, our mission, our mandate, our job is to provide price stability, which we have defined as 2%. So we currently have inflation at forecast 6.8 for this year, moving down to 3.5 and 2.1 in 24. All of that is above target throughout the whole projection period. And we need to do what we have to do, which is to bring it back to 2% and we shall do so. Of course, we are not exactly in the same situation as Augustine was saying. We need to look at our markets. We need to look at forces. We need to look at how the uncertainty that we have on the horizon is going to clear. And I think that in that respect, what happens on the energy front? What happens on the war front, unfortunately? What happens in relation to wage negotiations and how inflation expectation continue to stay anchored as they have re-anchored, other than some of the elements that we will be looking at very carefully in the job that we have to do to bring inflation back to 2% over the medium term? That's the same determination. Yeah, Governor Bailey? Well, I agree. I mean, like Christine, I am concerned about how the war front and the energy supply front is going to evolve. I think that is the major risk. I think it, by the way, if I'm not saying, I mean, we had an inflation number out last week and what I thought is that on the surface, it was pretty much in line with what we expected underneath the surface. There was a sign that we saw a shift in the makeup of inflation from the good supply shock to the energy and food shock, which I would sort of characterize as the post-COVID supply chain shock moving more into the, sadly, into the Russia-Ukraine world. And obviously we watch that very, very, very carefully as we go through the year. As we've said in our last month's policy report, unfortunately, there is going to be a further step up in UK inflation later this year because that's a product of the way the energy price cap in domestic energy prices are set based on the data that we've observed over the last few months and we have to take that into account. But as Christine and Jay have said, the key for us is to bring inflation back down to targets and that's what we will do. Hindsight is a beautiful thing, I know. And I also know the ECB published a paper and saying what you got wrong on inflation, but going forward, Mr. Karstens, how do we need to look at inflation differently? So for example, in the US, and I lost the same to Chair Powell, the stimulus, did we miscalculate the impact this would have on inflation? Can I just say one thing? I think it's a very healthy exercise to actually assess why you were off the mark. And if all of you actually do the same exercise, you will probably realize for most of you that actually energy was vastly underestimated and that bottlenecks were also expected to clear much faster than everybody had expected. I don't think the ECB is alone on that count. We're the first one to have acknowledged it publicly, but I think it's a good exercise. No, I mean, in the previous panel, for example, and if you look also into recent annual economic reports, you see that, for example, some very, very long-term health key components of the toolbox that we had to analyze inflation has not turned out to be so reliable. Like, for example, the traditional Phillips curve that has been a workhorse for all of us. That, to some extent, kept, I would say, for some time giving the indication that inflation could not rise that fast. We faced many, many limitations like that. I mean, I have to be very transparent. Last year, we tried to crank out some numbers of inflation and we put them out there. And here's one of the researchers that did the job and he had the hard time cranking up higher numbers as much as he tried. And we had it at the end of the day wrong. And part of it, I mean, I'm not blaming me to him. It was my responsibility, too. But that was the toolbox we had. Now we find that there are many different hidden relationships or very key aspects about inflation expectations, expectation formations, situation in labor markets that can give you non-linearities. Therefore, we had a very nice model for normal circumstances, but as it has been said periodically here or in a righterative fashion, turning points is what is very, very difficult. So we have entered into dynamics that are very different. So I think where there needs to be a lot of work is, and we started doing some of that job recently in the VIS, is to understand much better what is happening with inflation under the hood. Why some relative prices eventually become more contagious to use that word and start spreading around? How, why some shocks are more perdurable than others? Why there are some prices that generate more spillovers? What determines the frequency of firms revision of their prices which certainly increases with inflation? The new technology that we have talked about, I mean now we have Amazons and we have all these markets that probably were not there, certainly were not there when CPIs were calculated a few years ago. So there is a lot of things that we need to catch up. So I think it's a challenge for us. I think as we are accumulating all this information, I'm sure also will give us, and he's given already more leading indicators of what inflation is doing, and that will be very, very helpful to calibrate a response. So yes, I mean, I think inflation will evolve. The inflationary pressures we're facing today are very different than the ones we had in the 70s, and I'm sure that the bout of inflation we might see in some decades forward will be also very, very different. So we need to preserve that nimbleness analytically to approach, and also be very mindful that we need the right instruments. And another thing that has been very useful is that the different banks have been, the central banks have been able to adapt their instruments to the monetary policy according to the circumstances. Does everybody on the panel think they understand inflation better now than they did four or five months ago because you could also have, again, going back to Krugman's point. Can I say something? I mean, certainly I believe that we understand it a little bit better, not fully. There is a big sort of a big, I won't say black box, but certainly gray box, where I think in the profession of economists we need to do better. And that's understanding aggregate supply. We are, at least I myself consider myself an economist that was trained under the dominance of aggregate demand. And we know a lot how to aggregate demand response to interest rates, how they respond to income, how monetary policy and fiscal policy has a transmission mechanism to aggregate demand. But we usually take aggregate supply as given. And it's very complex. It's very, very complex. And I think we need to understand far better aggregate supply. One confusion that is out there today, I think, is that the flexibility or the elasticity of supply in the short term is there, but that also necessarily makes it the same as a bottleneck. What is the difference? How impact that on inflation? So I think the understanding of aggregate supply that also includes labor markets is of the essence. So from the challenges we are taking forward, for me that is one that is very important. I like the idea of a gray box. In addition to aggregate sectorial supply as we learned this morning with great interest is also working. I want to go back to Jay made the point earlier and it's very important that we've had a series of supply shocks. This is the thing. I mean, the word transient has become discredited, but it isn't really in one sense because that was built on a single supply shock idea. That supply shock can work its way through. The duration of that supply shock can often be shorter than the transmission response of monetary policy. Now, we've not been in that world. We've been in a world where we've had a series of supply shocks. I mean, we look at our shocks. Yes, we had an initial demand shock from COVID, but then we had a supply shock with the supply chain recovery problems. We've had obviously a very serious supply shock coming from energy and the war. We've had a labor market shock in the UK because labor force has reduced in size. And as Jay was saying, it's how you deal with a series of supply shocks, large supply shocks, with no air gap between them, which of course feeds through into expectations because put them all together, they're not transitory in the traditional sense of the term. To a power? One way to say it would be, I think we now understand better how little we understand about inflation. That's not very reassuring. Honestly, this was unpredicted. I was looking at our, at the time of our June meeting one year ago, of the 35 people who filed with the survey of professional forecasters, 34 of them had inflation below 4% for last year. Of course, it was way above 4%. So really, everyone had the same model, which was the Phillips curve model and it just was not capable of producing high inflation. But what it was missing was something that's completely missing in the data for 40 years, which is basically a collapse of the supply side. You know, the US economy is famously adaptable. You know, it has the minimum of structural rigidities, all that kind of thing. And yet here they are. So what you had was very strong demand, but hitting effectively a vertical supply curve. So ordinarily when people want to buy cars, which they really did, because they didn't want to write on public transportation rates were low, they had all these savings, the car companies would make more cars and they might raise prices too. In this case, they couldn't make as many cars. So what you got was straight up the vertical supply curve, a big price increase. But I also think in principle, at least, that process could work in reverse. So that as demand comes down, inflation could actually come down more quickly than would be, there are other relationships that people think about when they think about how do you get inflation down, which are more typical of a simply overheated economy and entrenched inflation, the sacrifice ratio and those kinds of things. But I think this could be, I don't know that it will be, but it could be different because it's just that process working in reverse, potentially. Do you see that process, presently guard working in reverse? So actually, I mean, it's different because of the process. What we're seeing at the moment is more this swing or substitution that was described earlier in the day where because of COVID, everybody suddenly decided to stop using any kind of services particularly if there was social distancing about it and move to goods. Hence the car industry in the US and stationary bicycle rather than the fitness club. And now we are seeing this sort of substitution back to services where people who've been deprived of restaurants, hotels, transportation, theaters and all the rest of it, that side of it is currently booming and is sustaining the recovery that is otherwise under the various series of shock that Andrew was alluding to. So how these things are going to evolve in view of the uncertainty that we have in front of us here in Europe is something that really remains to be seen. How difficult presently guard is it to, for example, model a gas embargo from Russia? And did you... Well, it has proven, look, it has proven extremely difficult and as we have seen from the sort of misunderstanding of wrong assessment that we have seen in the last couple of years, that is difficult for sure. And the rest is for the moment more in the scenario planning world than in the remodeling of what's going to happen on gas prices. Mr. Carson's talking about emerging markets a little bit. So first, I don't know whether they're coming to their stride because they're used to the volatility but there are huge implications, of course, of what the dollar is doing. Yes, of course. I mean, I think at the end of the day, a very strong dollar in price for many of them, very tight global financial conditions. And so far, again, as I mentioned, the exchange rate, the impact or pressure has been contained, but at the cost of very high rates. What is a little bit concerning, not that it couldn't be managed, but for some emerging markets, this is arriving at the time where there is high corporate debt and high sovereign debt. And therefore, some fiscal prudence is important. At the time where emerging markets are facing still very severe challenges, many of them haven't made as much progress with, for example, vaccination than in other countries. Also, for many of them, the impact of the increase in commodity prices, in particular, in food, and in energy is very important. I mean, usually, commodity price, commodities per se, food stocks, and energy occupies a much larger proportion in their basket than in advanced economies. So that obviously reflects itself in more social need. And well, of course, many governments, according to their capacities, they are doing programs to assist people. So at the end of the day, they are on a tight situation. They have to manage things very prudently. I think there, as if we compare these with other periods, emerging markets are better prepared. But I think that the challenges are there. I think a big challenge for many emerging markets, including, I would say, China, is how to get growth back at a much healthier pace. I think the growth in emerging markets has slowed down not now, but even before the pandemic. To some extent, the virtues of globalization have sort of run out of steam. And therefore, the relevance of structural reforms are very important. We need to look much better into how to get growth going independently of the use from fiscal and monetary policy. And to a large extent, that also applies to advanced economies. Thank you. Governor Bailey, do you think inflation in the UK will be longer, will be more elevated for longer than other parts of the world? Well, I mean, as Christine has said, we are going to be affected by the shock that Christine described in terms of energy prices in Europe, because essentially it's a common shock in geographical Europe, use that term carefully, because it's a single, particularly for gas, it's a single supply system. So although we don't actually import a large amount of gas from Russia, it doesn't, in a sense, the price is formed outside that particular, so in that sense, it was similar. I think where I would, as things stand, expect some more persistence in the headline rate is because we do have, as I mentioned earlier, this price capping system in domestic energy prices. At the moment, it's a six-month cap, but there is a proposal to take it down to three months, but other things equal. You would imagine that that would put a bit more persistence in it, and we will, of course, have to explain that, because if we can observe a downward path of underlying inflation, we will have to be very careful to explain that if that's how it emerges. But does Brexit actually make bringing down inflation harder? Well, Brexit, I should say, it's very hard, at the moment, if not impossible, to separate out the immediate effects of Brexit and the immediate effects of COVID. So when I look at trade, and when I look at labor market particularly, you can see effects taking place, but you can see that COVID and Brexit are having some effects. And the reason I say that is because the Bank of England, for some time now, has had sort of a path of a Brexit effect in its projections, which said there would be a fall in trade intensity initially, and over a much longer period of time, there would be an adjustment to that. And we haven't yet seen anything to vary that assumption. Does the fall in sterling actually help with the economy? Well, we don't target the exchange rate, let's be clear. The exchange rate is one of many inputs to many, many influences on inflation, and that's the way I treat it. So has it been a part of it? I mean, we used to say that it was a positive, it was lower. No, I don't sort of attribute sort of positives and negatives. I'm not surprised, by the way, the path of sterling for the reason that, as I said earlier, I think the UK economy is probably weakening rather earlier and somewhat more than others. I think that's been somewhat evident now for a few months, and of course it is over the last few months it's happened. But I think in our system today, we do not attribute good and bad to movements in the exchange rate. It's one of the many things that goes into the analysis process in terms of how we think about the evolution of inflation. I was going to ask you about the dollar and whether that helps with price stability, dollar strength. So like Andrew, we don't have responsibility for the level of the dollar. That's the elected government's job. That's the Treasury Department's job. And so it's just another financial condition to us. And since our economy, the external sector and our economy is so much smaller than it is for the others here, it's not that important. But dollar has been strong, which would tend to be disinflationary, but only at the very margin. I mean, I think what we're seeing these days is our adjustments in exchange rates. But I think the way of thinking of those adjustments in most economies including in emerging market economies are part of the adjustment process. I mean, they are endogenous variables. For example, the dollar is stronger because the US economy is stronger because interest rates are higher and also how the shocks that are around are affecting the different economies. So the fact that you have a very strong commodity pricing in Europe with gas and so on and so forth is very logical to think that the real exchange rate will depreciate. And that's part of the adjustment. So I think we're in a world where in most of the cases, exchange rates are part of the adjustment. In some cases, in particularly in emerging markets, it has more of an impact in the monetary policy management is because the past through for moving of the exchange rate into prices is much higher than in advanced economies. So in advanced economies, unless there are huge swings, the impact on the trajectory of inflation is not that relevant. Chair Powell, Mr. Croson was talking about a gray box. What's your gray box? Is there something that you wish you knew that would help in setting monetary policy? Only one thing. Yeah, I'd go back to the same thing really, which is what did we get wrong? And that really was looking at these supply side issues and believing that they would be resolved relatively quickly. And by that, I mean there were going to be vaccinations. Everyone would get vaccinated. So the millions of people who dropped out of the labor force would come right back in. So wages wouldn't be under such pressure. That didn't happen for a range of reasons. It didn't happen. In addition, the bottlenecks and the shortages haven't been alleviated yet. And then on the back of that comes the new shock in the form of the war. But so it wasn't something wrong with our models because it wasn't in the models at all. It was a question of how to assess the persistence of these supply side shocks. And I do think that there'll be, to Augustine's point, and there is a lot of work going on to get smarter about the supply side. In the nature of it, though, it was a deep in the tail kind of a risk. And those are very hard to predict and assess when they come. Because monetary policy is not an exact science, how often do you actually speak on the phone to exchange ideas? Do you call each other and say, well, I've done it this way? Well, I can help out. I mean, because part of my job is to be able to attract them to Basel two times every two months to have very, very deep and open exchange of views. We do talk, but we're not going to tell you. And you will show. We'll show. We speak quite often. Quite a lot, but you're not going to tell me. President Lagarde, the ECB decided to apply flexibility to reinvestments from Friday, July the 1st. What will be the guideposts? We decided, look, I think if you allow, I'd like to just come back to why that is. Because I think that this risk of fragmentation that is much talked about is something that is very inherent to the European construction and to the fact that we have 19, soon 20, but let's say 19 for the moment, member states that each have their respective fiscal policy, that each have their respective financial markets. And as a result of that, our unique monetary policy has to be transmitted throughout this imperfect market of ours, which has no fiscal union, no monetary union, no capital market union. And as a result of that, we just have to make sure that our monetary policy stance is actually transmitted throughout the entire euro area. And the two of them, I think I used that word, I don't know if it exists in English, but they are consubstantial. For our stance to be effective, it has to be transmitted throughout. So to do that, if we see that there are unwarranted disruption to that transmission, and if our stance is impaired as a result, we need to take action. And that is the reason we decided that we would use, as of your right, Friday. That's what I said yesterday. We would use the flexibility in the reinvestment of our pandemic emergency purchase program redemptions in order to address the potential risk of fragmentation. Second, we also decided. And it's work in progress, so I'm not going to comment upon it. I know that some would like to have details and understand before everybody else, and particularly before the governing council, what the details of that instrument will be. But we decided to reinforce our capacity to properly transmit our monetary policy by devising a new tool that will be considered by the governing council of the ECB on July the 21st. So don't waste your time asking me for details, criteria, conditions, safeguards. All I said is that it has to be effective, it has to be proportional, it has to include the right level of safeguards. And that's all I will say at this point. How do you direct staff? And it will be effective, and it will be proportional, and it will have safeguards. And it will be there, believe me. So how do you direct staff? I'm going to try my luck one more time. How do you direct staff when they design this new tool? I said what I had to say. The lady is not for turning, is the famous way. How do you look at China, Sir Carstens? How should we look at China at the moment? Well, I mean, it is of the essence that things start improving more quickly in China. I mean, certainly we need the growth that has come from China. They play a very important role in the supply chains. I mean, many of the tensions we're seeing around the world could be mitigated by higher growth rates around the world. I mean, part of the way we have started this conversation was trying to assess, or you wanting to hear, our thoughts about how can we bring down inflation without affecting growth. If we have other sources of growth, that would make the whole adjustment process simpler. Now, what is one major engine of growth that has not been contributing as much as it could? I have to say China. They have problems that are well-known. One that I hope that can be resolved soon is the one in the housing market. I mean, the housing market has been, or that sector, it's a very important contributor to growth. A lot of certainly very much impact in the rest of the global economy. And it's a sector where the Chinese authorities have been working a lot trying to bring it back to its food. And hopefully, they are close. But I mean, I would say at this stage, for their own sake, they are not growing as much as they certainly would like. And certainly, they are not growing at the pace. I would like them to see growth, because I think it would help us a lot in trying to solve some of the tensions we're living today. Do you think we'll see more de-globalization and how that will impact our economies going forward? There's certainly a threat of that. And this is not the work of the central banks, but I do think it would be a plus if we were to find a way to, you know, for China to take part diplomatically and economically according to a common set of rules. And that would be a big plus for global growth if we could get back on a path to that. But it's obviously, that's the work of elected governments, not for us. In terms of globalization, yes. I mean, you can imagine a world. It's not hard to imagine a world where we break into these blocks again, and that would be a world of lower productivity and lower incomes over time. It doesn't necessarily have to happen that way. People are looking at shorter and more durable supply chains. It's not clear how much of that will happen, and if so, what would be the effects? That could also be, that could be more secure, but perhaps, you know, not as efficient as the long, but fragile supply chains that we've had. So I think it's a very important question, and there's certainly a risk that the benefits of globalization would be lost. But obviously, there were benefits, and there were costs to the advanced economy, certainly. I mean, a question for all of you. And to wrap up, I'll start with you. What have we learned about the last 10 years of monetary policy, some of the tools that were used, be it QE or in other parts of the world, even negative rights? So the last 10 years were, so far, the height of the disinflationary forces that we faced. And really, it goes back before the global financial crisis, but really, since the global financial crisis, we had very low inflation. In the United States, we had 3 and 1 half percent unemployment for a couple of years, or right in that range, for a couple of years, and inflation didn't react at all. So we had a very, and that gave us the ability to really lean into the maximum employment mandate, and we did that. And I think that was the right thing to do in that world. That world seems to be gone now, at least for the time being. And we're living with, as I mentioned at the beginning, we're living with different forces now, and have to think about monetary policy in a very different way. So I think if you want to know the lessons to be learned of the last 10 years, look at our framework. Those were all based on a low inflation environment that we had. And now we're in this new world where it's quite different with higher inflation and many supply shocks. And strong inflationary forces around the world is quite a different environment. President Lagarde, how do you think we'll look at some, well, negative rates, first of all? Well, I look at it in a similar way to Jay. And I think the last 10 years have been 10 years of heroic fight against disinflationary forces with central banks demonstrating great agility to innovate and find sometimes alternative, accommodative ways of dealing with forces that have nothing to do with what we are experiencing now. So we're certainly learning from that period, but we are in a new environment, which also I think will force us to show agility and capacity to respond fast to data that we are receiving at an accelerated pace and with a scene that is changing geopolitically as well as economically. Mr. Costins, do you think? But I don't want to sound too dark because I think that there are also good things happening. I was reflecting on your comments, Jay. And think back December, when it was in December 20, when we thought that this pandemic was going to hit us for the next two years, at least until such time when vaccination would come to market. And vaccination came about in a matter of nine months as opposed to the three years that it normally takes. In the same way, everybody expected a couple of weeks ago that the Geneva agreement of WTO would be a complete illusion, would never happen. Well, certain things happen when there is goodwill, agility, creativity. So I have great faith in human inventivity and talent, particularly when it includes women. To your point, though, a lot of these problems are happening because the recovery and the expansion have been so much stronger and faster than expected. If you look in the US labor market as an example now, it's a very good time to be in the labor market. You can, you know, there are two job openings effectively for every unemployed person. So people are switching jobs, they're getting pay increases. It's a terrific labor market. The problem is that wages are moving up in some areas at levels that are not consistent over time with 2% inflation. So it's kind of overheated. Nonetheless, it's a byproduct of a very strong recovery. Governor, on pay increases, the UK is going through a bit of a bumpy ride with a lot of pay increases. How do you see that developing? Well, of course, it's a reflection of the inflation world we're in at the moment. I mean, I'm on record as having said a few months ago and I'll be careful because I'll probably get it right and precise in terms of what I said, that I think, you know, very high pay increases, trying and particularly, you know, and supplies to both pay increases and price setting by companies. If everybody tries to beat the inflation and particularly the version we're having, which is this imported inflation shock, which we just, you know, we can't avoid, then it will set the second round effects off. And of course, yes, we are seeing some of that tension unfold. I would have to note that I would note that rather more people seem to be agreeing with me today than we're doing several months ago. But that's not the point. I mean, the point is, yes, I think it was likely that we would see this, but I think I have to say the point about second round effects holds as much today as it did then. I mean, that's the risk. And that's why we will, you know, set monetary policy obviously to offset those if they emerge to get back to target. We will have to do that. And that's a, I'm afraid, you know, the thin code for saying the more they emerge, the higher rates will have to be. But what sort of pay rises could be alarming for the Bank of England? Is anything above 2% inflationary? Well, I don't think that's the right way to look at it because obviously there's always a productivity angle to it in terms of how pay is set. And it's very important that, you know, I made a general comment about second round effects, but of course pay is set in a market and that's important and it must continue to be set in a market. So it's wrong to say across the economy this is the right number because it isn't. Different cases and different situations. But I would just emphasize this point about second round effects, which is the crucial point for monetary policy. Mr. Carstens, has there been an over reliance actually on monetary policy in the last 10 years? Well, I mean, I think even going a little bit further away, 2007, 2008, monetary policy needed to respond to put it in a different way, lack of resilience in growth. And yes, to some extent, policies that traditionally are meant to support some fluctuations in the business cycle have probably been used a little bit more, probably in a more lasting way. And my sense is the role of fiscal and monetary policy to stabilize the business cycle into the future are hitting limits. If fiscal policy is obvious because there are issues of debt sustainability or can be issues of debt sustainability. And while now if we had the long period that where monetary policy could have an impact on growth because as Christine said, as Jay Powell and Andrew have said we faced a very, I would say specific period of time of very low inflation and where monetary policy could make. If you had the instrument, why not use it, no? But I think what we should learn, and this is not only, I mean, at the end of the day the economists do not depend only on monetary policy. At the end of the day they depend on fiscal monetary, but also many other real policies that are out there. And what we have seen is in the last 10, 20 years, it's a very unreliable process of economic growth in the world. Some of course have been distorted by issues like wars or pandemics, but even before. I mean, we don't have the resiliency in growth that we would like to see. And that puts at different points in time a lot of stress on fiscal and monetary policy. And at some point that has some impact. So I think, yes, monetary policy will have to adjust, will have to evolve, we are learning lessons. But I think where we need to work more is to understand growth and how can we promote it in a more reliable fashion. Who doesn't agree with that on the panel? Does everybody? It depends what kind of growth. And I really think that the determination of the Europeans to focus and encourage investment in the green growth is critically important. If we want to develop the economic potential of any economy, you have to go in that direction. That's the part of reliability. And resilience, if you don't. Governor Bailey and then Chair Powell. Well, I was going to observe. I mean, a point I was going to come into on forming what Jay and Christine were saying earlier about what we've learned from the last 10 years and then make a point on growth. I mean, one of the things we learned over that period was that the underlying interest rate, the structural R star, have gone down for a long period of time, actually, certainly in the UK when we look at it. The question is, what do we learn? These structural issues that we're facing today, what do they imply for it? I'm probably not in the same place as Charles Goodart because I think these trends are so long run, particularly on the sort of population side, on longevity side, that they have quite a long way to play out even on the basis of what we know today. So I think the underlying story will obviously move, but there's a lot that's sort of built into it already. Just on the shorter end point on growth, I mean, I think one of the puzzles, which we're certainly looking at on that, though, if you take that sort of underlying story of the last decade, certainly in the UK economy is, why hasn't investment been greater? Because there's a gap opened up between the sort of the risk free rate and the return and the risk taking environment, and yet investment has been very subdued. Now I think the other question we have to ask there, but are we capturing investment there? I mean, it's something we're looking at certainly, which is, is there just more investments of a non-traditional sort, which probably not wholly, but in part, helps to explain that? But I think I see that as an important issue to understand in terms of what we want to know going forwards because there's no question that investment, as Christine was saying in terms of climate change, is a big part of the picture going forward and how we solve some of these issues that we've been living with in terms of low investment and low productivity in our case as well. Chair Powell, do you think we've been over-reliant actually on monetary policy, especially as a Fed? Yes, I do. I would just say, I think that in economic discussion, generally, there's much too much focus on demand management and not enough on things that will make us grow at the maximum sustainable level, sustainable growth in the longer run. There's not enough focus on that. And that isn't the Fed's job. That's more the job of, again, elected governments, but I'd like to see more of that. So how should governments be thinking about their economic policy going forward if monetary policy is not the end of the game in town? You're asking me that? Yeah. So I'm kind of out of the business of giving advice to the fiscal authorities these days. So I would just say, I think when I get asked that by an elected representative, what I say is focus on investing in people and investing in things that will increase the productive capacity economy over time. That's what I say. And in terms of, I think what a central bank should do is stick to its knitting and do its job and leave the major issues of the day to the elected representatives. President Lagarde? We have to stick to our knitting, that's for sure. But if we are asked for advice, we should give it. And I think that to the extent that fiscal and monetaries have worked hand in hand during the pandemic and to good effect, I think we should also reflect on how fiscal can leverage what we do and how we can facilitate it. But this is no longer the same corporation hand in hand work that we used to do during the pandemic. And I would give the same advice. Invest in people, invest in green, be targeted and focused. And in the medium term, the fiscal space has to be made sustainable for all countries certainly in the euro area. Mr. Carson, what's the correct way of fiscal policy to help monitor? Well, I would definitely add my voice to investing people. But I would say more in different aspects that enhance the human capabilities. Very specific. Well, education is one. I think what we have learned with the pandemic is that health systems are extremely important. And I think to a large extent, we have invested there. The other thing is that all digitization will imply in technological advance, will really impose very, very dramatic pressures in many countries. And I think how to adapt ourselves to that is very important. Climate change, as Christine said, is of the essence. In many parts of the world, incorporating ladies and females into the labor force is very important, and investing more in them, I think it's also of the essence. In many parts of the world, law and order is very important. And so I mean, the good and bad things is that there is a lot to be done, but there is a wide variety of areas where we can act. And I think it can make a difference relatively soon. Governor Bailey. Well, I mean, Jay's right. Independence goes both ways now, Alden. And we must respect that, and we do. I think there's a common interest, going back to what I was saying a few minutes ago, in understanding why the trend rate of growth has fallen. Because in our case, it has fallen. Now, then for a central bank, I'm not going to start prescribing what should be done about it, because in most cases, that will be outside our remit. But obviously, we have a strong interest in the trend rate of growth. So understanding the trend rate of growth is an important thing. And it's something where we can collaborate. That sounds, I think, perfectly happily. It's 3.27, so we only have three minutes. And I mean, I'd like to ask you just to close us off, Chair Powell, if you're speaking now to the American people, to try and help them understand how long it will take for monetary policy to go back to something that resembles normalcy, what would you tell them? I would say that we fully understand and appreciate how the pain people are going through dealing with higher inflation, that we have the tools to address that and the resolve to use them, and that we are committed to and will succeed in getting inflation down to 2%. The process is highly likely to involve some pain, but the worst pain would be from failing to address this high inflation and allowing it to become persistent. President Lagarde? Dito. Ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha, ha. Governor Bailey? Absolutely. I would just add one thing that to Jay's point and Christine's point about understanding the pain, this form of inflation is even more painful for those on low incomes because it is concentrated in the essentials, in energy and food. And when you look at the consumption baskets of different groups of income groups in the population, I'm sadly, it's the lowest, those in the lowest income are most concentrated in those things. And that is very difficult and something that obviously is very sad, but we have to do everything we can because as Jay said, if we don't get it back to target, the consequences are worse. All right, it's 3.30 p.m. So thank you so much for joining us and thank you so much for a great panel. I'm gonna ask the gentleman to follow me and then we'll get you to say on stage.