Survey-based measures of inflation expectations, for example, suggest that the ECB’s influence on expectations seems to have become much stronger since the establishment of the euro. 2 What are the implications for policy?
I will mention two of them, both stemming from the notion that the appropriateness of policy cannot be judged in abstract terms: policy needs to be carefully calibrated to the underlying economic structure. 3 First, in a relatively rigid economy, the adjustment falls primarily on quantities.