 Governor Kearney wants a longer introduction. I'm for chair Yellen Luthe. I see. Good morning, and I'm David Wessel from the Hutchins Center on Fiscal and Monetary Policy at Brookings. It's an honor to be here with all four of these illustrious governors in this beautiful building. I was struck that how much, sometimes it said that nothing ever changes in central banks, but that's clearly not true in communications. An awful lot has changed from Montague Norman's assertion, or at least what his biographer said, was that his mantra was never explained, never excused. And there was once a book on the Bank of England in which the job of the press officer was described as keep the bank out of the press and the press out of the bank. When I began covering the Federal Reserve for the Wall Street Journal in 1987, as Mr. Evans mentioned earlier, it didn't even announce its rate decisions. When I came to Germany for the Wall Street Journal in 1999, I once told Alan Greenspan that I had just come to an ECB press conference and that the ECB had provided free food for the reporters. And Alan Greenspan's reply was, yes, and which did you find more useful? Alan Greenspan, as was mentioned earlier, joked that, or maybe it wasn't a joke, that quote, if I seem unduly clear to you, you must have misunderstood what I said. And I must confess that although I always admired Jean-Claude Trichet's linguistic flourishes in English, I wasn't sure I always understood exactly what he was trying to tell me. However, one time I was working on a story on ECB communications. And Jean-Claude Trichet was at the Bank of France. And I went there with a colleague to interview him. And we were discussing about central bank communications. And Mr. Trichet said, it's not so hard. And he had this yellow pad. For instance, there were three points I wanted to make in this interview. I've only made two of them, so let me make the third right now. So a lot has changed. The prevailing academic wisdom has shifted away from the notion that central banks should cultivate mystery and surprise in favor of transparency and predictability. Michael Woodford wrote in 2005 before the crisis that not only do expectations matter, but at least under current circumstances, very little else matters. Communication is now seen as an instrument of monetary policy. And I think as central banks have become increasingly independent of elected politicians, communications have become more important as a way of accountability in a democratic society. So as Jean-Claude Trichet reminded us this morning, other central banks have joined the ECB in holding press conferences. The Bank of England, as we'll discuss later, has a very interesting graphic explaining its recent rate hike in words of one syllable. People who work for the ECB, Michael Steehn and others tweet regularly. Mario Draghi gives speeches in which can be boiled down to bumper stickers. I was kind of disappointed when I came to Frankfurt that I didn't see whatever it takes on the back of all the outies and BMWs. And I was fascinated to read a recent Reuters stories in which it was reported that AI researchers from Nomura and Microsoft have been using software to predict future monetary policy from Corotason's facial expressions at press conferences. So a lot has changed. I guess that's a favorable sign. He's laughing. So today, I'm gonna take advantage of this extraordinary panel desk. Has central bank communication gone far enough or too far? Has transparency come at the cost of clarity? How do we judge success? Surely it's not only by how the bond market reacts. And I think most importantly, and I hope we get to it, what role does central bank communication play in reaching beyond the market to the public that both here in Europe and elsewhere has lost some confidence, not only in central banks but in public institutions as a whole. And we have quite a bit of time here and so I look forward to some questions later. I'm gonna start with some questions for each of the panelists and then we'll have, I hope, a lively discussion. And Governor Draghi is our host. I think it's appropriate to begin with you. And I wonder if you could reflect a little on how the communications that these ECB has evolved and particularly how you see the evolution of forward guidance. As you know, as everybody knows, you've made a change a few years ago to tell us that key interest rates will remain at their present levels for an extended period of time, well past the horizon of net asset purchases. And you've talked about asset purchase continuing until the inflation process is well underway. So has this worked? Is this a permanent feature of central bank communications or was it just a extraordinary moment? Thanks. Well, our history of a young institution actually shows that forward guidance has become a full-fledged monetary policy instrument. We, it's not only evolved of course since the times that you just recalled when the measure monetary policy jurisdiction could change interest rates without saying anything to the market, to a forward guidance about short-term interest rates and the expected path of the economy to a much richer instrument. And along this journey, we moved from communicating our sort of views of the economy and our views of the interest rates to the reaction function, communication and conditionality. And in so doing, obviously, we were also communicating our views of the economy for the months and years to come. The history has two, our history has two landmarks. The first is in July, 2013, when we tried to give guidance as far as interest rates were concerned in order to shield the eurozone financial markets from what was happening in the United States, namely the paper tantrum. And the fear there was that movements in short-term interest rates could actually cause movements along the yield curve and make our financial markets condition deteriorate or as we used to say and I would still say, and cause an unwanted tightening of financial conditions. So we gave, the purpose of that forward guidance, which was the first time, was the forward guidance was qualitative and the purpose of this forward guidance was protective. Was not proactive, was not, and it succeeded. It succeeded contrary, by the way, to everybody's expectations and everybody's assessment at the time. It was said at the time that having such a broad forward guidance not well specified quantitatively or time-wise would make it ineffective. I remember I was in exchange about this, actually in New York, where I said, well, you know, we are simpler folks. We stay with simple formulas and it worked. And then there is another date, another landmark, the in January 2015, because well, after that, of course, there were renewed weaknesses in the eurozone and deflationary risk that materializing by the end of 2013 beginning of 2014. And so in January 2015, we formulated a sort of a much broader and richer forward guidance where we talk about interest rates, we also talk about asset purchases, and then the horizon over which these purchases would be carried out, and we introduced also timelines for that. And in so doing, we also kind of formulated a framework where the various parts of this forward guidance, the interest rates on one side, and the asset purchase on the other, would interact in a synergy so that each would actually amplify the effect of the other one. And I think it worked. So all in all, our experience shows that forward guidance has now become a full-fledged monetary policy instrument like anything else. Oh, by the way, there's also a good reason for this renewed importance of forward guidance. And that has to do with a zero lower bound. Until we reached that point, the forward guidance was there certainly, but it was less important. So do you see this as a permanent feature that the ECB will be giving forward guidance even as you move away from the zero lower bound? It's hard to say, but I mean, so far the experience has been successful. Of course, it has to be linked with credibility, it has to be linked with many other things in order to be successful. But why to discard the monetary policy instrument which has proved to be effective? But isn't there a risk that you will constrain yourself undesirably by making forward guidance that the markets see as, in Charlie Evans' words, a dissien when you mean it to be Delphic? Well, the risks are always there, but the question you're asking is, are you sure you're always able to make an appropriate forward guidance given certain conditions? Well, that's silly. The answer to this has to do with the ability and the effectiveness of the central banks. You can make mistakes in changing interest rates when they shouldn't be changed or not changing them when they should be changed. And the same thing may happen for guidance. It's an instrument like any... I think it has to do also with the quality of the listeners as well. Well, that we take for granted. Ha ha ha ha. Governor Karota, you've had an interesting experiment in Japan as trying to use communications of various ways to change inflation expectations and to lift them. I'm trying to imagine when Jean-Claude Trichet became president of the European Central Bank at the end of the 90s, the notion that the problem would be lifting inflation expectations probably wasn't on his to-do list. How do you judge your success at this and what's worked and what hasn't? As you know, we introduced so-called QQE or Quantitative and Qualitative Monetary Easing in April 2013. And that QQE included two elements. One is large-scale JGB purchase program. The other is a very strong commitment to achieve the 2% price stability target at the earliest possible time. And then actual inflation rate started to accelerate. And by summer of 2014, actual inflation rate reached around 1.5%. And inflation expectations also approached around 1.5%. But then we experienced huge downtown of oil prices. Oil prices before the summer of 2014 used to be around 110 dollars per barrel, but started to decline quite sharply. In the next one year and a half oil prices, crude oil prices declined toward less than $30 per barrel. Huge decline. And since Japan imports practically all oil from abroad, actual inflation rates started to decline since summer of 2014. For the time being, despite this significant decline of inflation rate, inflation expectations somehow remained around 1% plus or something. Partly because we expanded QQE in autumn 2014, but oil price decline continued and continued. And actual inflation rate decelerated and eventually inflation expectations also declined. And since mid 2015, there's some notion that emerging economies may slow down. Not just China, but many emerging economies in the world may slow down. And oil prices continued to decline. And financial markets became somewhat unstable. So, reflecting this situation in January 2016, we introduced negative interest rate, which was not very popular. Minus 0.1% on a marginal portion of reserve deposit at Bank of Japan. But quite substantial flattening of Ilka resulted. I mean, Ilka used to be like this and then significant decline of Ilka and also significant flattening of Ilka. So, during summer of 2016, we made so-called comprehensive assessment of QQE, negative interest rate, and so on and so forth. And reached the conclusion that we should better switch from the quantitative target of JGP purchase toward Ilka of control. That is the overnight policy rate at minus 0.1% and 10-year JGP rate around 0%. And then the yield curve could be quite nice for the economy as well as financial markets. Then inflation expectations more or less stopped to decline. And now, inflation expectations are slightly picking up. So, two things. One, inflation expectations are formed not only by forward-looking way, but also backward-looking way. And in Japan, where people experienced 15-year-long deflation from 1998 through 2013, inflation expectation formation appears to be largely backward-looking. So, for the guidance and strong commitment, yes, did work to some extent, but looking at the oil price shock and the resultant inflation expectation decline, we reached the conclusion that inflation expectation formation in Japan is largely backward-looking. So, at this moment, yes, we continue to make strong commitment to achieve the 2% inflation target or price stability target at the earliest possible time. But at the same time, we continue strong accommodative monetary policy by way of yield curve control so as to make output gap further improved and reduce unemployment rate further. By so doing, actual wage increase and the actual price increase would be accelerated in coming months and years. And of all the things you've done, what do you think has been the most successful in changing public inflation expectations? What sort of, which of the various communications do you think has had the biggest favorable impact? I think communication is not a matter of what I would say, technique or some location or anything. It's a matter of policy itself. And from my experience in the last four and a half years, the best communication policy is to explain in straight words the content and intention of your monetary policy which could be understood, not just monetary experts or economists, but also the general public. I think that is the most important. And it's not, as I said, a matter of technique. It's a matter of straightforward, explanation of the content of your policy and intention of your policy. And we have a Monetary Policy Committee eight times a year now. And every time after the Monetary Policy Committee, I have press interview about one hour explaining the discussions and the result of the decision by the Monetary Policy Committee. And even from time to time, I use a panel showing the figures and graph and so on. So communication policy is in some sense very delicate, difficult, but on the other hand, it's not theoretically complicated. It should better be straightforward. That's the best way I think. Chair Yellen, you've had now four years of experience as the chair of the Fed, but of course many years of monetary policy making before that. It struck me this morning in the discussion, Beatrice made this point that sometimes people act as if the goal of monetary policy statements is to never surprise the markets and one judges success on what are the markets did what you want. And I'm curious how the markets look from your vantage point. Do the markets, the traders, the economists, do they understand contingent guidance? Do they want more certainty from you than any human being could possibly provide given the unpredictability of the economy? So yes or no question? I think the answer is yes. The markets, my experience is that market participants are very interested in knowing exactly when they're interested in knowing what the path of policy will be and when changes will be made, either in asset purchases or the policy path. And that's something that central banks are loath to provide and that was discussed, the reasons for that in the first panel. The appropriate policy path certainly depends on expectations about what the medium term outlook is and I believe every bit of forward guidance even when it's been calendar based over the years. The FOMC has used the words we think such and such will be appropriate in light of the outlook for the economy and for us really almost all guidance should be conditional and related to the outlook for the economy. Obviously there is inherent uncertainty about the outlook for the economy and so the committee's expectations about appropriate policy evolve over time in line with the outlook. When that happens, my experience is that market participants often feel that they have been misled and I can give you examples of that. We first decided to raise the funds rate off the effect of lower bound at the end of December of 2015 and at that time our statement provided qualitative guidance that we expected the path of adjustments to be gradual but I believe starting in 2012 the committee began to publish quarterly projections of each of the participants of their economic outlooks and associated paths of policy. So market participants look to our so-called SEP or summary of economic projections to get a sense of the policy path. Now a look at those charts immediately reveals that there's disagreement. We have more recently highlighted the median as a kind of summary of the projections of the participants in December of 2015 when we first raised rates 25 basis points. The median in the SEP suggested that over the next year there would be four rate increases. Now as we got into the next year into 2016 there were shifts in the outlook particularly for the global economy some reassessment of the domestic economic outlook and of course we intended for market participants to understand that four increases during 2016 not only was there not a committee agreement about that but also that each and every participant's expectations or assessments of the appropriate path of policy would be realigned in the light of new information. Now as it turns out over the course of that year we ended up raising the Fed funds rate exactly one time not four times and I would say that market participants certainly should have understood at the end of 2015 or always that that's a possibility that these are not odyssey type of promises but Delphic type of forward guidance at best we're always trying to emphasize the economic conditionality of our forthcoming policy decisions. Market participants I think felt that they were disappointed had been misled I certainly don't think that that was the case and again I think in line with Governor Corota's comment we tried to not only explain what changed about the economic outlook that justified our single move in say 2016 rather than four moves we might have anticipated at the beginning of the year but also the objectives that we're trying to achieve and for the broader public as opposed to market participants I think the most important thing is to know what is it that we're trying to achieve and that we intend to readjust our instruments that after all most members of the public are not fixated on what's going to happen at the next meeting or will there be two or four increases but they do want to know that we're committed to our 2% inflation objective that we want to achieve our employment mandate and that we will readjust these instruments as we think necessary in light of those policy goals that's our commitment but I do think that market participants are looking for greater certainty about the policy path than central bankers think it's appropriate to offer most of the time So do you ever think that providing the markets with the so-called dots the projections of interest rates by the members of the Federal Open Market Committee with the benefit of hindsight in your experience was that a good idea? Now that you're on the way out, you can be candid. I want to take advantage of this. I suppose it has costs and benefits and, you know, for example... But you can't quantify them? I'd say the episode that I just described suggests that there is a cost because to the extent that the public believes that somehow there's a commitment that is embodied in the median that we show of rate forecast for the year that's a cost and it is not what we intend but on the other hand also on balance I think there's been a benefit from providing to the public information about the paths of policy that committee members think would be appropriate in light of our objectives and let me give you more concrete illustration of that I think one of the things that we have realized in recent years is that so-called R-STAR or the neutral rate of interest is likely quite low now and perhaps will stay low for the indefinite future in part because productivity growth has been slow and we have aging populations around much of the world. We've said in our policy statement and this has been part of our statement since early 2014 for seeing that we were likely to begin raising rates we wanted the public to understand that we did not anticipate a path, a sharp path of increase in rates and we use the language that we expected rate increases to be gradual which was about as far as I think we could go in actual policy statement but what on earth did gradual mean? Well, we wanted to communicate something quantitative about what gradual means and we also I think wanted to communicate that we thought neutral was very low and one reason why the path could be gradual is because getting back to neutral would mean moving to a rate that likely by long historical standards would be judged to be quite low and that type of information I think was clearly communicated in the SEP and over time we actually include in the SEP individuals estimates of the longer run normal or neutral rate of interest so we're providing information on that and market participants in the public could see over several years that those expectations were shifting down not only among market participants but also within the FOMC and it gave a much clearer sense of what does gradual mean. Thank you. Governor Carney, thank you for being patient. It seems to me that the Bank of England has made a number of... No one's ever said that before? No. I'm learning a lot. Taking notes. The Bank of England has changed quite a bit in recent years both in the way it communicates with the sophisticated author in the so-called Super Tuesday where you put out the statement and the minutes and the inflation report all in the same day to make the job of the press easier but you've also done... I've been struck by what you've done to reach out to the public. When you did your rate decision there's a fascinating, simple explanation of the rate increase and the reasons on the website. I think it's inflationreport.co.uk that is clearly written for people who don't understand monetary policy. Why did you do what you did? And later this week you and several other governors are going to Liverpool and you're going to speak to high school classes and stuff. So I'm kind of interested in how did you're thinking about all this evolve and what are you trying to achieve and is it working? Well, thanks. First off, Mario, thanks for having us here and to commend the ECB for this initiative. I was paying attention. I was learning a lot actually there. And one of the things I think you heard from my colleagues about to hear from me and it's in your question is that in the end, whether it's the ECB, the Fed, the Bank of Japan, the Bank of England, we're speaking to the people we serve first. Markets in parallel or a second. I mean, we're always conscious that the messages in some way will land with the public we serve and we have a responsibility in various ways to get those messages across in a consistent way to the different audiences but in a way that are readily understandable. So just briefly in terms of some of the changes we've made, the Super Tuesday thing was in part because having a decision, the Bank of England didn't used to have a press release but having a decision without a press release was odd. Having that, then having the minutes come out a while later, the inflation report in between with the press conference, three events for the same decision, all with their own nuances and twists and turns. Not surprising, it's confusing a bit for the markets but confusing for the public. And so just collapsing them together and getting rid of following the lead of the ECB and the Bank of Japan, getting rid of some extra meetings. We saved 20 official communications a year. You know, and I'm doing this, it's a pre-bottle to Hyun Shin's talk of whether central banks talk too much. We're talking less officially. So there's one institution that's getting more productive and we're trying to get more productive. But it was partly around that. But then when you look at what we put out, a 50-page inflation report, we still communicate in 15-page speeches with lots of charts. Expert audiences read them, understand, digest, respond to them. That's true, but that's not the way to communicate with the general public and it's not a sustainable form of communicating in a world that has had enough of experts to use the famous quote in the United Kingdom. And it's also not consistent with how people access information. Just looking at the stats with all due respect to the Financial Times, 300,000 people read the Financial Times. There are 30 million Facebook users in the UK. So just using different channels tells you orders of magnitude of who you can achieve. But you can't package, it's not about tweeting your own speech out because nobody's going to receive that and read it. So you have to change the content. And what we have tried to do, and it's a first shot and we'll have to get better at, is to layer the content. So you have a very simple message that is tweetable and can go out on whatever decision is made and then what you've kindly just referenced, which is to take a 50 page inflation report and reduce it down to a relatively simple narrative with icons, key charts that explain why we did what we did. And then to use multiple channels in order for that to get out. The other thing we're doing though is trying to change. In order to have this cultural change in how we communicate externally, I think we have to do things internally as well that change the way we communicate to each other. So we're collapsing down, we haven't landed on the magic number, say to my colleagues, but we're experimenting with restricting internal memos to six pages. We are making sure that charts and graphs that are produced inside the institution can be instantly picked up and sent out, sort of snip and share outside the institution so that the internal communication has the impact that the external communication is supposed to have. And so we need that cultural change. And then the other thing that I'll mention is that we're also trying to, what we are, increase the number of portals into the bank. So like the Fed and the ECB, there's a blog, we set up something, Andy Haldane's here, set up something called Bank Underground. We have now over a million hits on Bank Underground. It's just a series of little short economic pieces by staff that reach directly out to the populace. It is not mistaken for the Bank of England policy view. Quite often the posts will be somewhat at odds with where policy is or might be going, but that's okay because it helps with the general education. You talked about the schools, we're going to go out to over a couple hundred schools this year, but it won't just be me and other governors, it'll be mid-career staff who get out there and have broader spokespeople. So getting, the point I want to make is that in order to be as effective as possible on speaking with the broader public and actually ultimately getting to a dialogue as opposed to monologue with them, we need different channels, we need different content, but we need the change within the institution, and you only get that if you open it up to a broader number of people than just those at the top. So one thing you're saying is that thanks to the technology, you don't need to use intermediaries, whether they're market analysts or the press. You can go directly to the public and you describe that. But what are you trying, what's the goal here? How will you decide to succeed? Is the Bank of England popular? Is it that they believe your inflation target? What are you trying to achieve? Six pages internal memos is already a big achievement. That's fantastic. What's the median length of memos at the European Central Bank? In the interest of transparency, can we have a... Michael Ahrman can make it. No, but I mean the interest in transparency, I suspect it's true for everyone in the front row and certainly on the panel, is you get 300 pages of briefing a night easily on... So this would be a major... But to go to what really matters about the public, what are you trying to do? At the top layer, what you want is, for the institution to be viewed as credible or just competent, that price stability... No, but this is important. People have much more important things to worry about than price and financial stability. Those should be given. And they should be able to test that assumption in ways that are accessible. They should be given tools if they want to use them to judge that performance. That's the first thing. The second thing, and I think this gets missed in some discussions of guidance, people talking about forward guidance, is what do businesses and citizens think about the guidance? It's pretty clear what the objective of the Bank of Japan is if you're Japanese, if you're a Japanese citizen. When we had guidance, both post referendum and our initial state contingent guidance around unemployment, it was pretty clear, and we have limited and gradual guidance basically in parallel with the Fed from early 2014. Businesses across the UK understand that. They understood the contingencies. People understand these messages when they're simple and they're out there. It affects behavior. And that's actually the first one, competence, being given the benefit of the debt. That's crucial. You have to have that. But the other ones, at certain times, whatever it takes gets translated to the shop floor. It's widely understood. And that has an impact on economic agents. Now the market, last point, the market will understandably trade in and out and try to predict exactly what happens with the asset purchase program. Will the dots be exactly followed? There's a lot of money in that, and the markets will be frustrated or elated depending on where things... But in the end, it's a bit of a rounding error. Relative. It's more than a bit of a rounding error. Relative to agents in the economy, households and businesses. So you have to be able to get out to them. Governor Draghi, you have a particularly difficult situation in Europe, I think, where, you know, I read... Well, a little I can read in German in the German press. It seems to be rather critical of ECB monetary policy. Really? Of course, in Washington, if the German press is criticizing monetary policy, that's a sign that you're doing the right thing. So... In Italy, there's a lot of criticism of the financial... the regulation of the banks and stuff. So how do you think about reaching beyond the markets to the broader European public, and what have you found works, and what is it you just have to accept that this is Europe and everybody will always be pointing fingers at someone else? Well, we do a lot, but I wouldn't overdo this. I wouldn't overdo the crisis we get. They are there. One of the reasons why they are there is that we speak, we use English. And in different countries, especially in some countries, newspapers, there are some newspapers, for example, that have been shielded from international scrutiny because they've been using their domestic language and they've been sending constantly the same message for years and years and years, no matter what reality was. And so the readers of this newspaper, if they have no other access to any other source of information, think that reality is of one color while it's a different color. Do you have anybody in mind in particular? Not really, no. Just... His transparency goes only so far, right? Yeah. So that is a fact of nature. There is nothing you can do about that other than continuing to send the message that you think is right, that reflects reality, to be transparent and use these all possible channels. By the way, I sounded as if we were using only English, but in fact, we are using all the official documents and everything else as being translated in 19 different languages. But that's one official communication. It's different, of course, when you talk to newspapers or even on television, you use English. And so it's good to reach out. We're trying to do our best. Many things can improve. We now have a website, which has, if I'm not mistaken, something like a million access a month. We have a Twitter account, which is about 400,000 access, and so on. We have press conferences, speeches, all sorts of... We're trying to do our best. Any initiative that's being proposed is accepted gladly about that because of what you said, the peculiar reality in which we live. So any effort should be undertaken to this extent. But it also must be, as you said before, it must be ears that are ready to listen. And if you have realities where no matter what, the reception is not there, it's not a good reason for being discouraged. Actually, it's a good reason to do more and more and more. The victory may be far ahead. On the other hand, we are comforted by the fact that everybody else listens. So when you look at the... You ask yourself, is this a majority of the people who are criticizing us, either for supervision or for monetary policy reasons? Now the answer is it's a minority. It's a minority which has shielded itself from international scrutiny all throughout. Chair Yellen, once upon a time in the United States, basically the only person who spoke on policy was the chair. Paul Volcker and Alan Greenspan kind of laid out the line and other people said they were in favor of whatever it was the chair just said and the sun will come up in the morning. But in Ben Bernanke's era and yours, there's been a democratization of the process. It's much more open. But that means that there's a lot more people talking about monetary policy. And as Christine Graff said this morning, part of the game here is to try and figure out how to not increase the noise at the expense of the signal. So how have you found managing the message of the Federal Reserve when you have, at full strength, the 19-member Federal Open Market Committee with people not all in Washington, some of whom seem to enjoy being quoted in the press. Is that annoying, frustrating, a problem? So this really is one of the challenges of our system. We have a very large committee, 19 people. As you mentioned, we've had a kind of democratization of monetary policy that began really under my predecessor. I think our system has great strengths. The most important strength is that we avoid groupthink, which is a real pitfall in policy committees. I think it's important to have people sitting around the table who bring independent-minded views to the making of monetary policy. So it isn't an autocratic process, and it was, I think, under Chairman Greenspan and earlier a more autocratic process. We have very healthy policy debates, and yet we usually are able to reach a consensus about our broad policy strategies and most moves that we make most of the time. But from a communication standpoint, it is challenging because individuals, members of the committee are able and give lots of speeches. The press often covers and gives a lot of attention to each individual's speech. To try to deal with this, and we probably will never, given our structure and size, be able to deal with this totally effectively. But some years ago, the committee adopted a policy on external communications, and we agreed as a committee that what we want to do is explain to the public the committee's goals and strategies for achieving them, and we committed that each member of the committee in their public communications, first and foremost, would explain the logic of the committee's decisions, elaborating on what we jointly say in our statement, which is a joint communique of our assessment of the outlook and likely policy strategy or path. Now, sometimes that gets lost. Individuals should be explaining in their speeches, really elaborating on what's in the statement and explaining what we have agreed upon. We agreed that having done that, individuals can go out and explain their individual perspectives. I'd say that guidance hasn't been totally faithfully followed, although many of my colleagues do try to do that, and the press tends to pick up on differences, particularly difficult when we have an upcoming policy decision. Generally, our guidance states that people should avoid trying to forecast short-term policy decisions and certainly not make commitments about how they themselves will vote at a meeting that has not yet taken place. That type of statement is very negative for collegiality. We do believe we should be going into meetings prepared to listen to one another before making a policy decision, but I will admit that often at least what's reported is that individuals are talking about having made up their minds about policy communication, about policy for a forthcoming meeting. So this is a work in progress. Diversity is a strength of the committee. The whole design of the Federal Reserve system, going back 100 years with the Reserve Bank structure we had, was intended to bring a variety of perspectives and voices to the table that works. We try to communicate a consensus in our statement. A reason for adopting press conferences is the members of the committee wanted there to be someone, namely the chair, who would be out trying to explain the committee decisions, the consensus, leaving them a little freer to voice individual views, but it is challenging. We mentioned earlier our summary of economic projections. We have recognized as a committee that we could offer the public greater guidance if instead of just displaying at full strength 19 different views on the outlook and appropriate policy, had a single committee view or possibly a consensus view. We have experimented with trying to produce a consensus view, and I have to say those experiments were not successful. Partly we have a very large committee in attempting to craft a consensus view of the outlook, including a path of policy, proved to be extremely challenging. We discovered also that when you're operating with multiple instruments of policy, so some of the experiments that we had were taking place just as we launched QE3, and a consensus forecast would have required us not only to agree on the outlook for policy and the future path of policy, but also the path of asset purchases, and that was perhaps reaching too far to think that 19 people could agree on that, but do recognize the fundamental point that's the starting point for your question, that it is confusing to the public so many voices, and those are some of the ways we're trying to cope with that. Governor Karota, do you ever think that maybe there's too much transparency, that you have a very complicated set of objectives in Japan where you had a quantity target and a price target at the same time, negative interest rates, but they only apply to a small fraction of bank reserves? Do you sometimes worry that you're overloading the public when information is opposed to clarifying? Yes and no. And of course, the detail of our current policy framework, QQE, with ill-curve control is sufficiently complicated, so it's not... I mean, we do not expect that the general public would understand each detail of our policy framework, but at the same time, as I said, what is the core of our monetary policy framework and what is the intention of the policy framework could be explained and should be understood by the general public. Now, our monetary policy committee consists of nine members, three from the Bank of Japan, meaning governor and two deputy governors, and six others from outside. And every time we discuss economic outlook, financial market situation, and discuss about monetary policy itself, and always we take vote regarding the monetary policy itself, and we disclose in this statement after the monetary policy meeting who opposed and who agreed to the policy actually adopted by the monetary policy committee. So as far as the monetary policy itself, content and as well as intention are concerned about we are totally transparent. Does it create some uncertainty or not? Of course, as Janet said, I mean, like any other central banks emerging in developed countries, our system is like this. I mean, monetary policy decision is made by a body of committee consisting of nine members. And governor cannot decide monetary policy. Always the majority decide the monetary policy. And since there are diversity of views among monetary policy committee members, it's quite natural. Not always unanimous support is made to particular monetary policy decision. Sometimes eight versus one, or sometimes six versus three, and so on and so forth. And that showing that I don't think would reduce the effectiveness of the monetary policy, because it showed the diversity of views and after extensive discussions on economic outlook, financial conditions, and they reached by majority appropriate monetary policy to be implemented until the next monetary policy committee meeting. I think this is rather not the weakness, but the strength of the monetary policy decision showing the extensive deliberation on the economy and policy. I don't think current transparency is making any negative impact on the effectiveness of monetary policy or effectiveness of monetary policy decision. I think it's basically okay. I think it reminds me of something that Don Kohn once taught me that monetary policy is always appropriate at the moment it was made. Governor Carney, you had an unusual communications challenge with the Brexit vote. That's completely unlike what we've been talking about in inflation unemployment. I think it must be the definition of an exogenous shock Brexit. So how did you think about communicating with the benefit of hindsight, how well do you think the Bank of England did? Thank you, David. I'll bring that up. For the record, I warned him I was going to ask. You said Brexit and I said no. I said don't ask it. That was a full discussion. A couple of things. One of context, as you referenced, we have more than monetary policy responsibilities, price stability responsibilities, the Bank of England also responsible for financial stability, safety and soundness of banks. And under the statute for financial stability, we are required under law to identify major risks or potential risks to financial stability. So in the run up to the vote, we had to flag that we view that under certain scenarios, Brexit could involve material financial stability risks. And we particularly had to do that because behind the scenes we were working with a number of financial institutions and with the other members of this panel to take contingency actions or at least discuss contingency actions in case certain scenarios might have transpired. And so on the morning of the vote, after the vote rather, a vote that at the time, going into the vote as you recall, the market was betting only about a 10% probability that the vote would go the way it did at 10 o'clock the night before the polls closed. So it was a surprise. And there's some dislocation in some of the markets where there's actually less dislocation than big moves. And the communication issue we had following the resignation of the Prime Minister, the British Prime Minister, was to just get across a very simple message to first the people of the United Kingdom and relatedly markets to say we were well prepared for this situation. And the line that stuck was just to say that we are well prepared for this. And then we expanded a bit in terms of what we had done and to be tangible for markets, we had institutions pre-position with us collateral that would have allowed them to draw 250 billion sterling that day if they wanted of liquidity. And I referenced that we had coordinated with the other major central banks in discussing contingencies. There were no commitments or anything, but there was a sense of being able to address things in foreign currency as well. So that was a challenge which I think helped just to get across, again, a simple message and necessary message that this bit of the system is fine, issues have been anticipated, and life can go on. Now, the Brexit process, as you know, is going on, and so the communication challenges related to it continue. And one of the things that we've had to try to get across two things if I may just take a minute on that. The first is that these are exceptional circumstances that the UK is operating in at the moment, and that is a defined term in our mandate, our so-called remit. And the reason they're exceptional circumstances is that there is a impact on UK real incomes at least for a period of time. And that, at the point of exiting the European Union, to put it in tangible terms, I think everyone knows, but if you're going to trade potentially substantially less with your largest trade and investment partner, it takes a while to replace that income and it will have an effect. It has an effect through asset markets who've reacted very quickly, exchange rate, also equities. It has an effect a bit on demand, particularly business investment, not surprisingly, but it also has an effect very importantly on the supply side of the economy, in part because of business investment, in part because of less labour being available, but also because a certain proportion of capital, physical capital, in the economy will become obsolete for a period of time. Certain trade avenues will change. And it's the mixture of that exchange rate demand and supply effects that matter. As we sit today in the, during the negotiation process, it's the expectations of those effects that matter, how they affect the economy today. And so what this translates from a policy perspective is into two things. The first is that during these exceptional circumstances, we will stretch out the horizon over which we return inflation to target from above, so inflation 3% at the moment, and how long we take it to get back to target. Normally you'd say 18 to 24 months. We will stretch that out to three years. We've made that clear. In order to support the economy during the adjustment process. So we have a trade-off that's there. There are limits to the extent to which we're willing to do that. And we reached, as a committee, we reached those limits a few weeks ago, just to interest rates. That's the first thing we're trying to get across. The second thing is on Brexit, on the moment of Brexit, it will very much depend on what the final arrangement is with the EU 27 and what the transition path is from here to there. How those effect demand probably weighs on demand for a bit, although it depends on where demand is going into it. Supply, how big the effect will be on supply and what happens on the exchange rate tariffs and inflation. And the balance of those effects, ex ante, it's not clear which direction they go into, because you could see a balance which is inflationary, and they're not being that much spare capacity in the economy because capacity has been taken out. You could also see a mix of effects where there is quite a expansive relationship with Europe that there's a reasonable transition horizon, not much spare capacity has taken out. The exchange rate and other asset prices rally, demand holds up, but relative to supply, it's disinflationary. You could paint either picture. And so what we're trying to get across is particularly for market participants in the media, the balance of these so that people can adjust as these negotiations proceed. And to finish where I started the previous question about what are we trying to say to the people of the United Kingdom, well, very simple. We'll do whatever we can to support the economy subject to and returning inflation to that 2% target, so don't worry about inflation. So we'll support, but within limits. And secondly, we will make sure the core of the financial system is resilient to whatever outcome. So we're going to ensure that the banks and the stress tests are coming up in a few weeks. And the key judgment, I think, around that, that external observers have to make is are those banks resilient to a worst case outcome? And it's our responsibility to make sure that's the case. So again, the people in the country can worry about, I mean, if you're an exporter, you have things to worry about or to address, maybe I should say. And obviously citizens do as well. But price stability, financial stability will be addressed by the bank. But still challenging to when you ex ante, you don't even know which way. Yeah. And it's, you know, the real reason why you want transition arrangements or for businesses in the real economy on both sides and for the financial sector, not because it makes my life more difficult, obviously, but it certainly would help if I can put my vote in for a reasonable transition period. I will do so now, just to be clear. I would like one. Is that in your remit to help that happen? So it seems to me when the history of central bank communications is written, your whatever it takes and believe me it will be enough, will be seen as like one of the prime examples that words really matter and that they can at the right words at the right moment can have a powerful effect. So I'm curious what you learned from that, how much of the reaction you saw everything coming, you had perfect forward guidance or do you were you surprised by how well it worked and what were you thinking anyways? Well, that's like with Mark we agreed we wouldn't ask this. But no, but that's an example of how guidance, we were not yet in the forward guidance framework. It's an example of how guidance can actually elicit stabilizing behaviors, stabilizing expectation, stabilizing behaviors and the message was in a sense was twofold at the time. The first was that the central bank would have means to ensure that any re-denomination risk as we called it that time, namely the euro may well disappear from any time now was unfounded, ungrounded, unjustified. But the second message was that in so doing the central bank was actually acting within its mandate. And that's the other important point. And a lot of effort after that, those words, a lot of effort was spent in making sure and convincing people that we are actually acting within our mandate. So the links with transparency discussion we just had at that point probably at that point like never before and certainly never after that was quite clear that the central banks are very powerful and that was shown by the effect of those words that were independent and that was shown by the fact that we were going at that point against some sort of convictions which were strongly held in some parts of the eurozone and they were not elected because we could take that decision without going through debates, parliamentary debates or anything like that. At the same time exactly because they are powerful independent and not elected we got to make clear that we were acting within a mandate that had been stated by the legislators which were elected and in a sense all the core cases that have followed that decision were actually helpful, very helpful in clarifying this point. So the transparency is an integral component of accountability. It's a duty, no question about that obviously transparency is also, and that in a sense being shown by that example you quoted, transparency is also to be welcome because it improves dramatically the transmission of monetary policy at that time transmission of monetary policy was impaired by the fragmentation that was pervasive in the euro area at that time you remember that and the change in that situation was the beginning of repairing the euro area fragmentation to the point where we are today where basically lending rates and spreads especially across different countries and sectors are at historical low and also the other thing that's important to appreciate now that a few years has passed since then is that we calculate the dispersion index across countries because probably the most important thing for a monetary union is convergence convergence of different countries and the dispersion index between the growth in value added in different countries is now at its historical low you have to go back to 1997 so even before the euro being created to find such a low dispersion which shows basically the countries have converged a lot at least in terms of growth rates at least in terms of growth rates so in a sense the story of that episode shows that guidance helps to stabilize behavior and the stabilization behavior especially at times of crisis of course has a very powerful effect especially in the monetary union on convergence of different countries so you had this all worked out when you made that statement no so but that's a good thing about having people like you ask these kinds of questions I'll take that as a compliment so Chair Yellen on the other hand the taper tantrum episode where Ben Bernanke told Congress that you were beginning to think about tapering the QE purchases had an outsize effect on the market clearly not the one that was intended something of a surprise to Ben Bernanke as he writes in his book so what's your sense of why did that happen and what did you learn from that that you employed when you finally did do the exit from QE and nobody noticed so we were very surprised by the outsize market reaction to chairs I think this was in May of 2013 his indications that there were conditions that might be in place that would make it appropriate to start reducing the pace of our asset purchases the reaction we saw in the market I think the 10-year yield went up by 100 basis points or maybe even a little bit more that was something that simply could not be understood in terms of surprises about the path of our balance sheet and in fact if you look at the dealer surveys that we took around that time that the New York Fed routinely does the things that Chairman Bernanke said were pretty much in line with what market participants indicated they expected at that time so looking back on that experience I think what caused the taper tantrum was that the timing of the communications and somehow its character was unexpected and led not only to some small shift in expectations about the path of our balance sheet but a significant shift in expectations about the path of the federal funds rate it was interpreted as an unusual hockey sort of intervention that surprised the markets and suggested that there would be a steeper path for the federal funds rate than markets had anticipated so what were the takeaways I would say two that played a role when we've now made the decision to start shrinking our balance sheet lesson number one it's important to prepare the markets thoroughly for what we intend to do with our balance sheet so before commencing shrinking our balance sheet in October we laid the groundwork in a long set of communications in which we provided more and more detailed information about how we would go about doing this and importantly we wanted to make completely clear that the process would be one that would be orderly, very gradual and would avoid market disruption second and I think we were successful in doing that second is we understood that communications about the balance sheet can be interpreted by market participants in the public as entailing information also or leading to revisions and assessments about the policy path and therefore we needed to communicate clearly what would be the determinants of the policy path and not allow those assessments to be jolted by undesired short term rates and not to be jolted in some unintended fashion by our communications about our balance sheet so we made clear early on that what we intended was for the federal funds rate to be the primary policy tool that we would only begin to shrink our balance sheet when we felt we had sufficient scope when the funds rate had reached a sufficiently high level and the economy was sufficiently robust that we would be able to use our funds rate at least in most circumstances as a tool to adjust the appropriate path of policy to achieve our goals and when we felt we had enough scope to use the funds rate only then would we essentially put our balance sheet on a path to shrinking essentially as a background thing running on autopilot unless there were a very large negative shock to the economy and we made great efforts to communicate that that there was no change in our objectives no change in our assessment of the economy that to the extent that shrinking our balance sheet would tend to gradually raise the term premium and lead to some tightening of financial conditions that in effect the public should ignore that because we would offset on any unintended there wouldn't be an unintended shift in the stance of policy we would take that into account in setting the path for the federal funds rate and I think we've been successful in making those communications this time. Let me ask one final question before we turn to the audience Gabrielle I want to make sure that I'm confused by the clock do any of you find it difficult in the current environment to communicate with people in the financial markets without leading to the press and other saying oh yours giving away the secrets to the to the traders and the money interests rather than the public is that a constraint on you or not? Well I mean I think we all only communicate with financial markets in the way we communicate no close to our meetings with well if we I mean people will have meetings from time to time with financial market I mean I'll speak for myself we will have meetings with people in the financial markets you expect it's not going to surprise you that is regulator of most large banks we will meet with the bank CEOs and chairs for example but you know you always have someone there you and when you meet and discuss the economy you say what you say I mean that's you say what you say in public previously I had a slightly odd I'll give one example experience I went to Chatham house once and you know Chatham house rules and I spoke about the economy in Brexit you know very stuff I said exactly what I said the day before in public and someone leaked it to the press and it was you know a quote that was exactly the quote from the previous thing but it was like you know because it was Chatham house rules and there wasn't supposed to be leaked that's a bit unfair to poor Chatham house by revealing but they break their own rules and so you have to be I mean obviously you just have to be conscious of that and you know for financial market participants you know the bad news is it's it's take right you know we're meeting with them to learn about their perspectives on what's going on you may know that before becoming governor in the Bank of Japan I was president of the Asian Development Bank for more than 8 years and the way the committee is managed does have some implications to communication strategy and we have 67 member countries including almost all Asian countries plus US, Canada and 15 European countries their interests are so diverse and yet almost all decisions by the executive board regarding individual loan project policies long term strategies whatever board decision is made not by voting but by consensus and the decision would be released immediately showing that this was decided by consensus for something. Now there are two issues always the board insist to take voting that is staff salary and budget and here of course 12 members of the board representing 67 countries have diverse views regarding staff salary and budget and requested by the board I always took voting and usually more than 51% of voting share supported management proposal but this is a bit awkward and the press release would not show any country who supported or opposed or how many voting shares supported or opposed the press release does not say anything about that just say that supported a few members of the board objected and so on very I don't say ambiguous but very general trying to avoid accentuating board diverse views on the other hand the Bank of Japan as I said always take voting and the voting result is immediately released who opposed, who supported why probably because monetary policy committee is devoted to discuss and decide monetary policy fairly narrow range of issues unlike development, climate change, corruption, whatever issues in Asia and Pacific that's quite complicated and the diverse views among shareholders on the other hand monetary policy committee decide policies in the next few months so it's quite so you're the only person I've ever said that going from being president of the Asian Development Bank to head of the Bank of Japan was an easier job I'd like to turn to the audience for questions so we have some mics we have a lot of people so I think you could keep your question short and as before identify who you are and if you want to ask a particular person I'm going to take two or three questions so we don't end up with everybody responding on average. Short questions maybe to all Governors leaks on monetary policy decisions from your perspective are they very disruptive or maybe it could be even used as communication policy to send signal to check markets. Okay thank you I think there's another one over there I'm going to take a couple. Witold Groslaw from the National Bank of Poland communication has been very effective at anchoring low interest rate expectations and this has been very useful especially at the zero lower bound and it has been quite effective in boosting economic performance and preventing the deflationary risks but it has probably come at the cost of depressing the interest rate premium and now given that the in many asset markets we've got quite high valuations do you think central banks should become more vocal about the risks there might be in the asset markets that might have been a side effect of the ultra loose policies which might have been appropriate from the macroeconomic point of view but in terms of financial risk taking perspective we might have had some side effects those are two meaty questions why don't we start with the first one leaks however defined are they disruptive or a good way to prepare the markets for what is going to happen anyways Mark? Well you can't really leak a decision that hasn't been taken and when you come together these committees and certainly the Bank of England I think all these cases the decision is taken in the room between taking the decision and releasing the decision first point second point quickly is that we don't prime the press ever we don't talk to the press I mean if we have an interview it goes up publicly we say what's in the speeches we don't we don't brief journalists on stance polls similarly we we consider leaks to be very disruptive I can't really think of occasions when there were actual leaks of policy decisions and it is something that would be very contrary to our communications rules and would really be a violation of FOMC confidentiality restrictions we do in our speeches try to prepare the markets for policy that we intend to put in effect and sometimes when policy expectations in the market seem to be out of alignment with our own expectations I have done this myself given speeches in which I try to say things that will correct that misalignment but this is in public settings and I certainly wouldn't describe a public speech with press present as a leak so that's something that hasn't happened and is not something that we would tolerate as policy What role do conversations with the press have in your communication strategy apart from the people covering speeches? I would say also in communications with the press I would avoid giving specific indications again of policy decisions that actually haven't been made while trying to explain what my views are of the factors that bear on that decision so when we make the policy decision it can be well understood and of course I'm also doing that in my public communications Mr. Draghi there's obviously a risk of when you anchor interest rate expectations low financial stability risk a risk that prices will rise and I think the gentleman from the Polish Central Bank was asking at times like this when the economies are strengthening is emphasizing those risks appropriate role for a central banker Well this question has been with us since the beginning aren't your policies have inside effects on the financial stability side on depriving savers from their rightful interest rate whatever that is so on here there are differences the first one is that we have a mandate the mandate is price stability and it's defined as having an inflation rate which is close but below 2% so we have to deploy the instruments that we consider fit and proper to achieve that mandate we have said we are not here to protect the profitability of the financial system or other objectives that may be worthwhile being protected but they are not within our mandate the second point is that if the monetary policy is successful we will see an improvement in the macroeconomic conditions which will be the best tool to fight against financial stability risk let me give you an example negative interest rates when we started with that were hard cries of the especially the banking and insurance sector pension funds and so on now just focusing on banks what's happening instead is that profitability of the banking system actually didn't go down actually it's going up and has gone up for a variety of reasons one of which is that by the way not even the net interest margin has gone down the probability of lending has improved so much and the provisioning against bad loans has gone down so much that basically compensated the potential negative effect of negative interest rates of course these are averages within the very large aggregate of the banking system you may have realities where the negative interest rate is actually a big negative weight but all in all we haven't absorbed that are we observing financial stability risk well we are monitoring constantly of course in the spirit of low interest rates ample liquidity for a long time the possibility of financial stability risk is something needs to be constantly monitored but so far we are not observing are there circumstances where you think asset prices are out of line where you think it's appropriate for the central banker to speak and make that a warning well we have to distinguish many different situations first of all are asset prices out of line we observe local realities where asset prices may be out of line and not systemic ones local cases for example we've issued a warning through the ESRB about some real estate markets in some large cities in some specific countries or prime commercial real estate as one of the areas where prices where valuations are as we say stretched or overstretched but is it the change in monetary policy the right instrument to cope with these local things no the answer is no that's where macro prudential instruments should be utilized I would agree with Mario's comments I would say that the FOMC does discuss financial stability risks we indicate what those discussions are in our minutes and for example in recent months we've communicated in the minutes staff's evaluations that asset prices are elevated that means that price earnings type ratios are at the high end of their historical ranges but in terms of overall financial stability risks there's not a judgment involved in that as to whether or not those valuations might be sustainable because our assessment although there's uncertainty is that we are in a low interest rate environment and that may be one that's likely to prevail for a long time but more broadly financial stability involves looking at leverage maturity transformation both of the banking system and taking all of that into account we've also communicated that our overall assessment of financial stability risks remains quite moderate there's a woman here on the aisle Swaha Patanek from Reuters Breaking Views I was wondering both for Mrs. Yellen and for Mr. Carney Mr. Carney could you give us perhaps your experience of state dependence guidance which you mentioned in some of the old relationships how useful it was to do something that was one step to remove perhaps from your mandate and Mrs. Yellen you were talking about how you prepared the ground to avoid a sort of taper tantrum how does that mesh with the economic sort of independence if you like independence depending on economic data when you lay the groundwork so clearly are you trapped into doing something that perhaps economic data might have not justified if you'd had freedom so if you have state dependent guidance and the state doesn't things don't unfold as you expect causes some problems not necessarily and I think goes back to first who are you speaking to and can the informed observers follow what you're saying so I'll give two quick examples first we said that we weren't going to think about raising interest rates until unemployment fell below 7% MPC said that at the time when the recovery had started and it was picking up quite strongly and on historic reaction function of previous MPCs albeit the bank would have raised rates about two to three times let's say two times over the path from there to 7% so we provided the guidance of recovery picking up we want to make sure that the recovery takes hold that's a message first and foremost to individuals and businesses in the United Kingdom it's also a message to market message to market state continued we're not even going to think about it until it gets there and then we're going to evaluate when unemployment got to 7% probability in the market that we were going to raise interest rates very low I can't remember exactly single digit because the market looked at the trade off they said they weren't going to think about it got there they didn't now some commentators would have recharacterized what we said and look back and said that doesn't really matter because people understood it and we had polling and businesses understood it and the market reacted accordingly quickly the second example of state contingent which is a little more complicated but what post referendum we eased policy quite substantially and we said in August 2016 the majority of the committee said if the economy turns out broadly in line with our forecast we will ease policy further there will be further stimulus and there's a lot of uncertainty obviously about the path of the economy at that point the economy picks up it is stronger than our base case forecast and the market over the course of that quarter takes out any expectation of additional policies again the time we gave it we provided stimulus because we felt it was appropriate to manage that trade off I spoke about a while ago and then secondly to provide this message clearly that we were going to provide whatever support we could but the informed observers the market could understand the state contingent nature of the guidance and took it off when those conditions precedent weren't realized and so I think in both cases from our perspective both to general public and to the market it worked as it should have Chair Yellen I think the question was weren't you boxing yourself in what if the economy had not performed as you expected had you over prepared the market for something well so first of all we indicated early on that we would only undertake balance sheet normalization when normalization of the federal funds rate was well underway so we understood that if we put our balance sheet on a shrinking path on an autopilot sort of way that clearly we needed a tool that would have sufficient scope to respond to shifts in the outlook so we wanted to make sure that in most circumstances the fed funds rate and movements in it adjustments would be sufficient to respond to any variation in the outlook that we might experience so well underway was our mantra for we're not going to start shrinking our balance sheet until we feel the fed funds rate is at a level and the economy sufficiently robust we've got a tool to use but second recognizing that there could be significant negative shocks that would call into question whether or not we really had enough room to lower our federal funds rate we also put a proviso into our balance sheet guidance so we said here's our strategy this is going to be on autopilot and proceed unless there is a significant negative shock that calls into question whether or not we might have to cut the federal funds rate reach the zero lower bound and in the event of such a shock we stand ready to resume reinvestments or even expand the balance sheet again and resort to further asset purchases if we need to so we were well aware that we needed a policy tool and even a set of policy tools to cope with sufficient negative shocks gentlemen here so I'm Stephen Hansen from Oxford and I'm interested in this idea of different target groups and you can sort of tell from a bond price how a market has reacted to your actions so they're 10 year expectations of inflation or interest rates but at the same time several of you have pointed out that you also care about what the public at large thinks and I was sort of interested in what metrics you might imagine you could use to judge whether the public has reacted in the way that you wanted because that seems less clear to me so it seems clear that it's an important audience less clear that it gives you the instantaneous feedback or rather any sort of easy to interpret feedback that you can use to judge effectiveness. Likes or dislikes on the Facebook page take one more question there and then the governor's answer before we break. It's a management it's a question probably more for chair chairwoman it's about your dual mandate say how do you communicate when everything say both the arguments of your mandate go in the same direction probably it's easy to communicate but how do you communicate when they go maybe in conflicting directions and so even going through your recent experience if you look at the last year in the inflation was somewhat disappointing relative to your target while unemployment was not so can we conclude in the end the driver of your decision of the last few months was mainly the labor market side the employment the unemployment side of your mandate or not anyway it's a general question thank you. Chair Yellen one answer that how do you judge whether you're successful with the public high level obviously one looks at inflation expectations which are obviously going to be survey based but there's several layers of apart from going around and asking every single person in the country which difficult to do you have to rely largely on surveys there are surveys in relative trust of institutions there are surveys of business expectations on the specific you know my answer to the woman from Reuters question was based on thousands of business opinions not just Bank of England surveys but CBI and other surveys of what business is expected to happen what they did because of the guidance issues around Brexit we have a decision maker panel reaching up to ultimately will be almost 10,000 businesses across the UK which you can you know which is representative and you have to ask the questions and of course as you I'm sure you know you have to have a time series so you can truly judge the relative changes but if you care about these things you have to do these do those in order to help help track anything beyond anecdote. Of course we continue the monitor the bond market simply because bond market is one of the channels through which monetary policy can how do you measure what the public thinks so that as far as public things are concerned two things one of course various surveys particularly showing inflation expectations and assessment of the status of the economy and so on and so forth by the way regarding the second question the bank of Japan law prescribes that the bank must aim at achieving sound economic development through price stability so yes price stability is one of the mandate of the bank of Japan but it's not simple price stability it's price stability through which bank of Japan support sound economic development so a bit complicated but I still think that whenever you assess the public evaluation of monetary policy just price inflation expectation but they are evaluation of the general economy and chair Yellen briefly how do you manage the dual mandate is it really dual so we recognized having two objectives maximum employment and price stability they could come into conflict and when we issued in 2012 our so called statement of longer run goals and strategies was explicit in stating that if they came into conflict we would pursue a balanced approach taking deviations of both things into account and I think many of us were thinking about circumstances where for example unemployment is high in excess of the natural rate and inflation is also above target that we had a commitment to get back to 2% but we would take unemployment implications into account deciding how quickly to do that now you asked about the last year and it's a slightly different situation in which unemployment is lower a little bit lower than levels deemed to be sustainable in the long run and inflation is also too low now is it really inherently bad that unemployment is below the natural rate you know not sure and I think there are certainly members of our committee who would see unemployment going back to the natural rate as a constraint but not inherently undesirable so whether or not we're in a conflict situation at this point namely it's to get inflation back to 2% we are undershooting the natural rate of unemployment that's purposeful it's an aspect of our strategy it's intentional we're doing that to get inflation back up to 2% which is our commitment and it is necessary to undershoot the natural rate of unemployment but is that inherently bad a bad thing I'm not so sure it's inherently a bad thing but of course we want to get back to 2% and that's our commitment and the logic of it so this has been an extraordinary lesson in central bank communications I want to thank all four of the Governors for their time and cooperation and please join me in thanking them as well