•  Uncertainty regarding the responsiveness of prices to the output gap: attention needs to be paid to whether firms will raise prices and wages in accordance with the extent to which the supply and demand balances in goods and services as well as in the labor market tighten over time.
Bank deleveraging leads to a reduction in inside money, that is money created by banks, and with fragmented financial markets, liquidity flows within the euro area were disrupted. By providing an elastic supply of central bank money, we substituted inside for outside money to support the stabilisation of the banking system. Indeed, base money – i.e.