Among the cyclical factors, I would like to mention two in particular: first, persistent slack in the labour market – the unemployment rate has fallen sharply in the euro area, to stand at 9.1% in August 2017, but it is still too high; second, backward-looking wage bargaining, which means that low past inflation is feeding through to wages today. The influence of these two causes should nevertheless diminish with the recovery in economic growth and inflation. Structurally, many studies iii suggest that the Phillips curve, that is the relationship between inflation and fluctuations in economic activity or unemployment, appears to have flattened since the 1980s [slide]. Inflation seems less responsive to changes in economic activity in advanced countries, notably because of globalisation,iv which appears to exert downward pressure on inflation via the decline in imported goods prices and competition from lowwage countries. But a flatter Phillips curve does not call into question this relationship: we are in no doubt about the way we are heading: the recovery and job creations will lead to higher wages and, ultimately, more inflation. But we remain, nevertheless, less certain as to the speed of this adjustment. We are both confident about the effectiveness of our monetary policy and willing to be patient regarding the time it will take. II. The prospects: an adequate reduction of asset purchases, within an overall substantially accommodative monetary policy Let me now turn to the implications of this for our monetary policy.
You are well aware that we at the ECB’s Governing Council will decide this autumn on the re-calibration of our policy instruments beyond the end of the year – and, to quote Mario Draghi, “probably the bulk of these decisions will be taken in October”. We are now faced with a simple requirement, in line with our mandate to maintain price stability, and the progress towards our inflation  Page 4 sur 8 target: we have to reduce the intensity of our net asset purchases, while maintaining overall a substantially accommodative monetary policy. As regards our asset purchases, we have to reduce their intensity in a pragmatic manner, as we already decided successfully in December 2016. “Pragmatic” because, while keeping the current rules – we shouldn’t change any of the parameters, including the issuer and issue limits –, we can on the one hand exploit the margins of flexibility of the programme and we must on the other hand hold in reserve an additional purchasing capacity – if needed. So, there is no reason to be worried by the prospect of an adequate reduction of our net purchases, which would be perfectly compatible with maintaining a substantial degree of monetary accommodation. Indeed, QE is not limited to net asset purchases, and monetary policy is not limited to QE. Our monetary policy is based on a set of instruments [slide]: it is not a solo, but a quartet.