To some extent, this is what occurred over the earlier phase of the international economic downturn: we took sizeable risks in the direction of “activism”. What were those risks? First, in an economy as rigid as the euro area, it might well be true that temporary imbalances between demand and potential supply are slow to show through convincingly to inflation.
But if and when they finally do, they would be more costly to correct. 13 So, monetary policy should be sufficiently alert to any threats to the outlook for price stability, so that it does not find itself reacting belatedly – and with less chance of success – to trends that have long been underway.