Recent data releases and survey information provide further indications that economic activity over the remainder of this year is likely to remain weak but should decline less strongly than was the case in the first quarter of 2009. This assessment incorporates adverse lagged effects, such as a further deterioration in labour markets, which are likely to materialise over the coming months. Looking ahead into next year, after a phase of stabilisation, a gradual recovery with positive  2  BIS Review 83/2009  quarterly growth rates is expected by mid-2010. Available indicators of inflation expectations over the medium to longer term remain firmly anchored in line with the Governing Council’s aim of keeping inflation rates below, but close to, 2% over the medium term. A cross-check of the outcome of the economic analysis with that of the monetary analysis corroborates the assessment of low inflationary pressure, as money and credit indicators continue to be weak. Against this background, we expect the current episode of extremely low or negative inflation rates to be short-lived and price stability to be maintained over the medium term, thereby continuing to support the purchasing power of euro area households. As the transmission of monetary policy works with lags, our policy action should progressively feed through to the economy in full. Hence, with all the measures taken, monetary policy will provide ongoing support for households and corporations.
As a macroeconomist whose work is grounded in thorough analysis, and a profound knowledge of models and data, he also takes into account the policy implications of the findings of his research. This is an important factor as he is a pioneer who has done groundbreaking work, and his research frequently encourages others. In this respect his work on the global decline in labour’s share of income has prompted a number of papers from academia and different institutions so as to understand this change over time and its implications for income distribution and productivity. Similarly, his work on capital allocation and productivity in Southern Europe has been widely influential. Mr. Karabarbounis, congratulations on my behalf and on that of the Banco de España. 2