But the ECB Governing Council faces a tricky monetary policy situation – inflation rates right now are far off our medium-term target. Indeed, some measures of long-term inflation expectations have even diminished distinctly in recent months. But that’s not just the case in the euro area; other advanced economies that have already engaged in large-scale bond purchases also find themselves in the same boat.
Finding the right monetary policy response to this predicament is anything but easy. The way policymakers interpret the drivers fuelling the current low inflation rates is naturally an important consideration. My preferred response would have been to “look through” this spell of low interest rates, rather like other central banks in advanced economies have done.