Inflation-linked instruments have become a useful instrument also for central banks, not to invest in but to help measuring inflation expectations, in real time and with high frequency. These expectations are used as an approximation of central banks’ credibility.
I would like to focus my remarks today on how inflation expectations can be useful for the conduct of monetary policy, in particular in the current conjuncture. I would like to start with the current challenges to monetary policy, arising in particular from the recent oil shock. I will then touch on how the central bank and market participants interact in shaping expectations.