However, under an inflation targeting regime, the debate tends to center on the relationship between the target inflation rate and the actual or expected inflation rate. As a result, the cost of justifying adjustments in monetary policy becomes quite high in the eyes of central bankers, when such adjustments are aimed to deal with imbalances which appear in forms other than price indices.
In recent weeks, some of the decline in yields has been unwound in the US and a few other economies such as the UK, but 10-year yields in the euro area have fallen further to reach new historic lows, with the 10-year yield in Germany now noticeably below that in Japan.