If the current environment of persistently low underlying inflation and elevated uncertainty were to persist well into the future – and there is a risk that it may – then the odds are large that firms and social partners will increasingly start adjusting prices and wages accordingly. In this case, more forceful policy action would be needed.
This level is simple to communicate to the public, credit rating agencies and investors. While, as I’ve noted, it is low relative to many countries, it is in line with a set of similar countries such as the United Kingdom and Australia.