Klaas Knot: On phronesis and price stability
Speech by Mr Klaas Knot, President of the Netherlands Bank, at the 25th Anniversary of the Euro50 Group event at the Bank of France, Paris, 28 November 2024.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Thank you, Edmond. And thank you for organising today's debate at the Banque de France – this is such a grand setting.
Testimony to that is the splendid Galerie Dorée, where we will have dinner later this evening. But even just walking in, you feel its historic importance.
On the right side above the entrance on Rue Croix des Petits Champs, you can see a relief of the virtue 'phronesis'.
It's a female figure holding a hand mirror while a snake curls around her arm. The mirror symbolises the ability to see oneself as one truly is – which is a source of knowledge. And the snake refers to wisdom.
In today's English, the Greek word 'phronesis' would be translated as 'prudence'. But that doesn't fully do justice to its origin. Phronesis is not so much 'cautiousness', but more 'being able to do the rational thing at a given time and place' – or shorter: phronesis refers to 'practical wisdom'.
As such, I believe it is quite fitting that this virtue welcomes anyone who enters this building. As a matter of fact, I think it wouldn't be out of place on every central bank building in the euro area. Because that is how the Eurosystem operates throughout all the changes our economies undergo: with phronesis, with practical wisdom.
Today, I would like to illustrate this with three examples: the balance sheet expansion at the effective lower bound (ELB), the changes in r-star, and the recent supply shocks.