For example, the  4  BIS central bankers’ speeches  current inflation forecast may have produced a much stronger reaction had the economy been performing much better than it currently is. In other words, in a simple Taylor rule world, the smaller the negative output gap, the stronger the interest rate response for any given deviation of inflation from the target.
The monetary policy dilemma is compounded by the fact that the economy is not experiencing significant demand side inflation. Real growth in consumption expenditure by households has been steadily declining, from 4,9 per cent in 2011 to 2,6 per cent in 2013.