The exceptional liquidity requirements of banks after the dryingup of the money market in the summer of 2007, as well as the severe tensions in some segments of the market for euro-area government bonds, have affected the transmission channels of monetary policy in the euro area.
To restore the effectiveness of monetary policy, the authorities have had to adopt several unconventional measures of temporary nature. The general complexity of the art of forecasting inflation, coupled with heightened uncertainty in the aftermath of the financial crisis, calls for prudence and humility. Policy makers have to be wary when deducing real-time policy implications from inflation forecasts.