And that was precisely why the Stability and Growth Pact was adopted in Europe, and that is also precisely why the Bundesbank repeatedly highlights why fiscal compliance is so important for making the euro a currency that fulfils its promise of stability once and for all. A clean dividing line between monetary and fiscal policy is important.
It is for those reasons that the ECB makes constant use of several measures of inflation expectations that are either based on surveys, thus providing a direct measure of agents’ expectations, or are based on the analysis of information contained in asset prices, which provide an indirect gauge of the inflation path expected by market participants.