All in all, we expect price stability to be maintained over the medium term, thereby supporting the purchasing power of euro area households. Inflation expectations remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. We will continue to monitor very closely all developments over the period ahead.
Falling bond prices translate into higher yields, which worsens debt sustainability prospects for those governments which have significant funding needs, thus validating investors’ expectations.12  8  According to Moody’s, “the growing risk that Portugal will require a second round of official financing before it can return to the private market, particularly if the country were to suffer contagion from a disorderly Greek default, or merely from the growing likelihood of a default.