But these unorthodox instruments are generally untested, less effective than standard measures, and probably more intrusive of market pricing. If deflation is detrimental to welfare, as I tried to argue before, so is an inflation rate that is too close to zero, as it may increase the probability of falling into deflation.
The second motivation for the May 2003 communication was associated with intra-euro area inflation differentials. In a heterogeneous currency area, inflation differentials across member economies reflect their different cyclical conditions, economic structures, and policy frameworks. Some of these factors are equilibrium phenomena, others require a correction.