However, when the adverse shocks to demand are sufficiently severe to push the nominal neutral interest rate substantially below zero, as they were during the Great Recession, monetary policy confronts the zero-lower-bound constraint, at which point the federal funds rate cannot fall low enough to provide the necessary degree of accommodation without becoming negative.
As you know, the primary objective of the ECB’s monetary policy is to maintain price stability. The Governing Council of the ECB aims at keeping inflation rates below, but close to, 2% over the medium term. In order to reach this objective we must assess the inflation outlook continuously.