While the transitory impact of the sharp drop in the oil price between the middle of 2014 through early 2016 should be duly recognised, it remains the case that the level of aggregate demand remains subdued and the cumulative record of below-target inflation in recent years may also exert an adverse influence on the formation of inflation expectations.
In addition, the assessment of the Governing Council is that risks to the growth outlook remain tilted to the downside, especially in relation to external developments. Taken together, these factors require continued close monitoring and analysis in assessing the likely future path for inflation and output. Let me make a couple of points about the design of the policy package.