And, so that the growth fostered in this way can create many jobs, structural policies will have to assume the principal role, while the role of monetary policy will then dwindle and fade away - alas - to nothing. BIS Review 67/1997
The complex task facing advanced economies of enhancing productivity and promoting employment growth as populations age is clearly beyond the power of monetary policy. Other policy action is needed to address this task. Boosting potential output growth is a key priority in itself, and higher potential growth would also help to raise the neutral interest rate and reduce the risk of overburdening monetary policy. An inflation targeting regime is a constant reminder that controlling inflation is the central bank’s main monetary policy objective. At the same time, monetary policy cannot be strictly rule-based – it must be flexible and robust. Economic models are useful and necessary tools for constructing an appropriate interest path. But no model is capable of fully capturing the complexity of the trade offs. Moreover, given the uncertainty associated with the functioning of the economy, it is neither possible nor desirable to fine-tune economic developments. Because even the most advanced models cannot reproduce the complexity of economic mechanisms or of the trade-offs facing central banks, interest rate decisions must also be based on sound judgment. Thank you for your attention.