Still, even though the transmission of our monetary policy to financial conditions has proceeded well, the transmission of financial conditions to inflation has taken longer than we anticipated due to new forces that have pulled in the other direction, in particular in the global economy. In addition, other factors in the economy continue to drag on the recovery.
Those include the lingering debt overhang in the public and private sectors and the weakness of the institutions in the euro area to deal with that debt overhang. This implies two things. The first is that monetary policy needs to remain sufficiently accommodative to offset any headwinds and produce a sustained adjustment in the path of inflation.