However, the low long-term interest rates are also a reflection of diminished growth expectations. After all, if economic growth remains sluggish in the long term, investments will then generate lower yields and, whether they like it or not, investors will have to content themselves with correspondingly lower interest rates.
This reflects the need for our monetary policy to have a forward-looking, medium-term orientation. It also acknowledges that short-term volatility in prices owing to non-monetary shocks cannot be controlled by monetary policy and that monetary policy should therefore only be held accountable for price developments over a longer horizon.