The index produced by the aggregation of indicators relating to investments also points to an ongoing upsurge in machineryequipment investments (Graph 12). Moreover, the high-rated increase in long-term credit use from abroad during the January-February period compared to the same period of the previous year indicates that investment-originated growth prevailed in the first quarter of 2006 as well (Annex Graph 1). Graph 11. Fixed Capital Investments (Annual Percentage Change)  Graph 12. Private Sector Machinery-Equipment Investments and Investment Index (MBYAT)  70  Public  60  Private  Total  50  8000  104  7000  102  6000  100  5000  40  98  4000 96  3000  -10  2006-I  2005-II  2004-III  2003-  2003-I  2002-II  2000-  0  2001-III  90 2000-I  92  0 1999-II  1000 1997-I  10  94  1997-  20  2000  1998-III  30  Private Sector Machinery-Equipment Investment (Constant pricesseasonally adj.) -20 04-I  04-II  04-III 04-IV  05-I  05-II  05-III 05-IV  MBYAT (Left axis)  Source: TURKSTAT, CBRT. 8  BIS Review 67/2006  Despite rapid growth in the total final domestic demand and the GDP, the current production tendency signifies a level that does not impose any pressure on prices. Hence, estimates for the output gap indicate that recent trend in economic growth does not pose a threat with respect to inflation (Graph 13).
I would first like to elaborate on the challenges we face as central bankers, then on our instruments and their effectiveness. I. Let me start with the challenges  a) As you all know, the Eurosystem’s primary objective is to maintain price stability, that is inflation rates below, but close to 2% over the medium term. However in the euro area, like in most advanced economies, inflation remains too low, despite the historically low interest rates: the harmonised index of consumer prices (HICP) indeed returned to negative territory, standing at –0.2% in February 2016, and underlying inflation, i.e. excluding energy and food, is only 0.7%. A certain number of factors are currently contributing to low inflation. Primarily, the euro area is faced with deflationary pressures associated with a series of economic shocks: firstly, the fall in oil prices, as well as the overall decline in commodity prices; secondly, the slowdown in growth in emerging economies and chiefly China; and, lastly, inadequate growth in the euro area with persistently high unemployment, which curbs wage rises and weakens demand and price growth. Moreover, structural factors, such as the ageing population, are also likely to exert downward pressure on the “natural” – or “Wicksellian” – interest rate. This rate can be defined as the interest rate consistent with the full employment of the factors of production. In this case, in order to achieve the right balance between savings and investment, markets rates must come down too.