Differentials tend to be larger during currency crises; when conditions are calmer and inflation rates converge, yields become more closely correlated and differentials smaller. The yields on short-term assets are controlled by national monetary policies. In recent years there has been a notable reduction in the power of central banks to control longterm yields directly.
To sum up, the information and analyses that have become available since our meeting on 2 July 2009 confirm the view of the Governing Council that the current key ECB interest rates remain appropriate. As anticipated, annual HICP inflation in July fell further into negative territory, reflecting mainly temporary effects.