The Governing Council’s focal point of aiming at inflation rates below, but close to, 2% in the medium term has to be seen in a symmetric way: Inflation rates above and below this focal point are a matter of concern for us. The subdued inflation outlook provides little safety margin against unexpected adverse shocks that may give rise to downside risks to price stability.
Inflation rates are thus outside of what we consider as a “zone of comfort”. One may argue that disinflation is in itself not necessarily problematic. Indeed, low prices may boost the purchasing power of consumers, especially if this is driven by improvements in a country’s terms of trade, like a decline in commodity prices.