The Eurosystem’s purchasing programme has played a crucial role in reducing the probability of deflation as perceived by financial market participants. [Slide 25: Renewed decline in oil prices have put downward pressure on prices] Most recently, the main reason behind sluggish inflation has been the decline in the price of oil. It has put strong downward pressure on inflation globally.
Some have even suggested that central banks may be losing the ability to understand the processes that drive inflation. I hope to persuade you today that this is not the case. I’ve been at this for a long time, having been part of the team that developed the Bank of Canada’s policy framework back in the 1980s.