The reaction function approach is arguably more robust to uncertainty about the structure of the economy than alternatives that seek to characterise policy by the first-order conditions of the policymaker’s objective function, although that robustness comes at the cost of not being formally the ‘best’ rule for a given model structure. See for example Levin and Williams (2003). 16  BIS central bankers’ speeches  It has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for Bank Rate cannot be preordained.24 But “data driven” means more in the post-crisis world. The economy’s performance will, over time, reduce some of the uncertainty about its supply side and underlying inflation dynamics. Although great uncertainties remain, we are arguably better informed about the dynamics of exchange rate pass through, the prospects for some recovery in productivity growth and the resilience of the UK financial system. Risks to the outlook and uncertainties about the economy are occupational hazards of monetary policy making. The MPC’s job is to assess them constantly and set policy accordingly. There will be no pre-commitments beyond an unwavering focus on conducting policy in a manner consistent with our remit. That means we’ll do the right thing at the right time on rates. Doing the right thing requires taking into account a powerful set of forces, part secular, cyclical, domestic, and global.
So there is a ground. We may asses that the shareholder in Slovenia is currently in unfavorable condition and is unable to financially support the bank in Macedonia. Not only financially, but also from a functional point of view. We have not yet made that assessment, but we could. It is an argument that we could use at any time if the shareholders from Slovenia do not perceive the situation here realistically and do not take the right decisions for their bank in Macedonia. The Euro area is out of recession. You were the most optimistic, even more than the government, and projected growth of 2.2 percent for this year. Do you remain at this projection or will it go up? The latest projection is still 2.2 percent, although we make a reassessment every month. Currently, developments are somewhat more favorable than those we have taken into account in our projection of 2.2 percent. It is true that at the very beginning we came out with the highest estimate for the economic growth this year. The data available so far suggest that we would be the closest to the actual development, which could be even better. In the beginning, in the first and second quarters, growth in the Macedonian economy was driven by some factors that were not very much related to the situation in the euro area, but our expectations for the second half of the year were that the European economy will recover, and that it will contribute positively to growth.