The interest rate lift-off dates in survey-based measures largely coincide with the time at which inflation expectations two years ahead – the horizon of the ECB/Eurosystem staff macroeconomic projections – are around levels close to, but below, 2 percent. This indicates that the link between our interest rate forward guidance and the inflation threshold is understood.
The turbulence that followed has now largely subsided and investor confidence is being restored. As a result, the outlook for the world economy has become more positive than it was last November. Financial markets have steadied in Southeast Asia, and prospects are good for a gradual recovery there. In Brazil the authorities have taken major steps to address their difficulties.