As is well known from the academic literature, the “physical lower bound” of short-term nominal interest rates is equal to the opportunity costs of holding cash. Monetary developments in the euro area show no signs of cash substitution, indicating that we are still far away from the physical lower bound.
BIS Review 78/2006  1  In the new ECB staff projections, annual HICP inflation is projected to lie between 2.3% and 2.5% in 2006, and between 1.9% and 2.9% in 2007.