Lagarde: On Removing "In Both Directions"; Forecasting Is "Difficult"

Is there a significance of removing the ‘in either direction’ statement from the ‘ready to act’ phrasing? Do you maintain your full confidence in the ECB's projections given that performance of the models has been mixed?

• A: We have removed the portion that says ‘in both directions’. However, ‘As appropriate’ captures the optionalities that are available depending on the data that is received. ‘In either direction’ was only inserted once.
• Providing forecasts is a difficult exercise that is based on the assumptions that you make and the models that you used. I have full confidence that this incorporates all the relevant information. Most projectionists have also been surprised by the inflation numbers, particularly in December and January. Very few could have anticipated the energy shock.
• We don’t take projections at face value, there is an element of discretion and judgement by the GC.