Technological advancements, while also reducing distribution costs, can limit firms’ pricing power by facilitating price discovery by customers. For example, the advent of online retail platforms has greatly increased price transparency among consumers as the share of people searching for information online has risen continuously in the euro area. The downward pressure on mark-ups and, hence, prices associated with the spread of e-commerce is consistent with an erosion of euro area firms’ profit margins, which did not return to their pre-crisis levels until late 2014. Empirical analysis does not, however, find robust evidence that mark-up shocks have been a particularly dominant determinant of disinflationary tendencies since the crisis. In any case, these forces are only temporary: they can move inflation away from its long-run trend, even for a protracted period of time, but cannot affect trend inflation itself, unless they infiltrate inflation expectations. It is through inflation expectations that shocks to the inflation formation process which would otherwise have no relevance for a central bank can become a monetary policy problem. This brings me to the third element in the Phillips curve – its intercept – which is determined by inflation expectations. Inflation expectations In normal conditions, longer-term inflation expectations should be unaffected by transitory shocks, which typically dissipate over the medium term. However, recurrent shocks leading to a protracted period of low inflation can be misinterpreted as a lasting decline in trend inflation, and could jeopardise public faith in the central bank’s commitment or ability to deliver on its objective.
5 See Bobeica, E and Jarocinski, M., “Missing disinflation and missing inflation: the puzzles that aren’t”, Working  Paper Series, European Central Bank, Frankfurt am Main, forthcoming. 6 See e.g. Lyziak, T. and Paloviita, M., “Anchoring of inflation expectations in the euro area: recent evidence based  on survey data”, Working Paper Series, No1945, European Central Bank, Frankfurt am Main, August 2016; and Speck, C., “Inflation anchoring in the euro area”, Working Paper Series, European Central Bank, Frankfurt am Main, forthcoming. 7 See Box 7 “The relationship between HICP inflation and HICP inflation excluding energy and food”, ECB  Economic Bulletin, Issue 2, 2016. 8 For a more detailed assessment of the pass-through of our non-standard measures to financial conditions see,  e.g., P. Praet, “The ECB’s monetary policy response to disinflationary pressures”, speech at ECB and Its Watchers XVII conference, Frankfurt, 7 April 2016; M. Draghi, “The state and prospects of the euro area recovery”, speech at the European Banking Congress, Frankfurt, 18 November 2016. 5/5  BIS central bankers' speeches