In the euro area in particular, private investment is not playing the accelerating role that one would expect at this stage of the business cycle, despite domestic demand gradually strengthening.
In contrast, given shocks like those seen over the past several decades, an average inflation rate higher than about 1 percent substantially reduces the frequency with which the economy hits the zero lower bound. An inflation objective of about 2 percent implies that monetary policy is rarely constrained by the zero lower bound and thereby minimizes the adverse consequences for macroeconomic stability.