By some estimates, it might even currently be negative in the euro area.2 As I have mentioned previously, potential reasons for this decline include demographics and falling productivity growth.3 Policy rates need to shadow this decline in the real equilibrium rate, otherwise monetary policy would be too tight, dampening activity and causing inflation to undershoot our objective.
How the ECB has responded to the crisis With these factors in mind, let me briefly summarise how the ECB has responded to the crisis.