That’s the most pessimistic view. I don’t take that view, I think it’s extreme. Indeed, after our communication at the last Governing Council meeting in Malta, you have seen that inflation expectations, five-years-five-years, have recovered – which is not the case for oil prices. It’s not a “normal” recession followed by a “normal” recovery. We have a cyclical recovery, but recently we have additional downside risks to our scenario unfortunately. Is there a point at which the ECB’s assessment of risks to the economy starts to actually erode confidence? We say clearly that we have a cyclical recovery, which is moderate. The investment cycle is quite weak still. We know the recovery is fragile. There are a number of geopolitical issues that weigh on confidence in general. This fragility is a fact of the environment. I think what is different about the recovery is that this is the aftermath of what some have called a balancesheet recession, and that starts to be better understood now. It’s a stock adjustment, there are legacy problems which our societies have big difficulties in addressing. You have still in a number of countries non-performing loans weighing on the balance sheets of a number of financial institutions. We also see that insufficient changes in the way that European institutions function have been weighing on the recovery. What do we still need in terms of European reform? We have gone a big part of the way with the banking union, but there the last miles are very important.
Can you explain the ECB’s assessment of how inflation is developing? Looking at incoming data, I would say that data are more or less in line with our expectations. But this has to be seen in a context where we had repeatedly overestimated future inflation rates. In the last years, we have repeatedly lengthened the horizon over which we would get back close to 2 percent. Mechanically updated projections suggest that the risk is present that we may again have to extend this horizon. And even if it’s slightly, it’s a repetition of a past pattern. And then you go into the question of credibility of monetary policy. BIS central bankers’ speeches  1  If you observe for example, that the price people are ready to pay for protection against inflation is zero, or very low, that’s not necessarily a good signal, as it suggests that they are not convinced there’ll be inflation. And that could be related to scepticism about the ability of the central bank to influence inflation even five years ahead – which would be quite serious. You cannot just reject that. Markets might be signalling that there could be some second round effects related to the fall in oil prices. Inflation expectations would then be hit at some point. Finally they could also reflect a very pessimistic view on the future, and that’s the more secular stagnation scenario where the falls of oil prices would be more the reflection of deep structural problems in the global economy.