If, instead, economic growth disappoints, inflation stays unusually low and the labor market continues to exhibit evidence of considerable excess slack, then lift-off will likely be pushed back in time. 1 With respect to the trajectory of rates after lift-off, this also is highly dependent on how the economy evolves. My current thinking is that the pace of tightening will probably be relatively slow. This depends, however, in large part, not only on the economy’s performance, but also on how financial conditions respond to tightening. After all, monetary policy works through financial conditions to affect aggregate demand and supply. If the response of financial conditions to tightening is very mild – say similar to how the bond and equity markets have responded to the tapering of asset purchases since last December – this might encourage a somewhat faster pace. In contrast, if bond yields were to move sharply higher, as was the case last spring, then a more cautious approach might be warranted. In terms of the level of rates over the longer-term, I would expect them to be lower than historical averages for three reasons. First, economic headwinds seem likely to persist for several more years. While the wealth loss following the financial crisis has largely been reversed, the Great Recession has scarred households and businesses – this is likely to lead to greater precautionary saving and less investment for a long time. Also, as noted earlier, headwinds in the housing area seem likely to dissipate only slowly.
The decisions, which usually pass through internal professional filtrations,  BIS central bankers’ speeches  1  and are made by the Governor and the NBRM Council, are within exclusive responsibility of those two bodies, and since the Governor is also a President (with the new law, a Chairperson) of the Council, I also consider these decisions, particularly if there were bad ones, as my personal responsibility. I actually want to say that the statutory independence of the NBRM over the last seven years was completely preserved. This should remain in the future. The central bank independence is crucial to the macroeconomic stability and very important to the financial system stability. With such position, I consider that we successfully pursued all assignments entrusted by the law: (1) We preserved low and stable inflation as a primary objective of the central bank. The seven-year average (2004–2011, April) equals 2.2%. I know what some may think of the so called “tolerant” or “useful” level of inflation. I leave it to them to “reconcile” their “tolerant” level of inflation and de facto fixed rate. In case they again oppose to the existing regime of exchange rate, to have even higher inflation, we will be decent enough to seek for an elementary analysis of its usefulness, i.e. of the advantages of such alternative. (2) We maintained a stable exchange rate level, without registering misalignment between its level and the economic fundaments.