Foreign investors are not the only actors to change their opinion regarding the most likely path of future variables. Households, corporates and all economic actors should reassess, what they thought sustainable previously about the future. With forward looking agents, this means that they react now stronger in output, expenditures and prices compared to how they did in the past.
Real interest rates are expected to continue on a declining trend given that the Bank’s large-scale JGB purchases will put strong downward pressure on nominal long-term rates and as inflation expectations rise in line with an increase in the actual inflation rate.