It may be noteworthy that the effect of the speed limit (narrowing the output gap) dominated the effect of the level of the output gap on the deceleration of deflation.5 Now we have reached the stage where it can be said that a long time is not needed to satisfy the conditions to end the quantitative easing policy.
Policy can support this process by doing everything in its power to reduce the country specific risk premium and enhance financial stability. This includes ensuring sustainability of public finances, anchoring inflation expectations, preventing the recurrence of irresponsible foreign exchange lending through prudential regulation, and last but not least creating a growth friendly environment through structural reforms.