Their expectations become self-fulfilling through adaptive wage- and price-setting behaviour. Today, an important element keeping underlying price pressures subdued is muted wage dynamics, which are shaped by many factors. At this stage, there is still a significant degree of labour market slack and weak productivity developments that keep a lid on wage growth.
From a monetary policy perspective, the growing diversification of firms’ and households’ portfolios is especially relevant, as they are more and more affected by the developments in financial markets. At least five major changes are worth noticing: •  In the last decade gross financial assets have increased very rapidly.