New Keynesian models generally agree that monetary policy can be effective even at zero lower bound, if policy can take the form of credible commitments to future interest rate paths. However, the risk is that such commitments could undermine central banks’ credibility if not communicated effectively.
This assessment is also reflected in the September 2013 ECB staff macroeconomic projections for the euro area, which foresee annual HICP inflation at 1.5% in 2013 and 1.3% in 2014. In comparison with the June 2013 Eurosystem staff macroeconomic projections, the projection for inflation for 2013 has been revised upwards by 0.1 percentage point, while the projection for 2014 remains unchanged.