4  See Draghi, M. (2016), “Addressing the causes of low interest rates”, introductory speech held at a panel on “The future of financial markets: A changing view of Asia” at the Annual Meeting of the Asian Development Bank, Frankfurt am Main, 2 May 2016  2  BIS central bankers’ speeches  to the lower bound.
In those conditions, any perception that the central bank might tolerate persistent downward inflation misses would be especially costly. It would lead first of all to a dis-anchoring of inflation expectations, which would cause real yields to rise mechanically. This would be contractionary and could not be offset by lowering policy rates even further.