But it would be difficult to counter the public’s assumption that this would be a surreptitious mutualisation of sovereign debt. The political desire to introduce ESBies in the near future is likely to be very limited. I therefore don’t see this proposal as being part of the operational agenda but rather as a subject for long-term study. Outlook Let me conclude. Weakening global growth and a generally lower natural interest rate are demanding very low, sometimes negative, market rates so that investment and consumption become more attractive. In the medium term we are thereby aiming to get inflation back to a level in line with our mandate to ensure price stability of below, but close to, 2%. Without our measures, the euro area economy would probably have slipped back into recession, with the risk of fully fledged deflation. We had to act and have prevented things from getting worse. Our measures have proved effective. Our mandate is clear. It says that in the medium term we have to achieve an inflation rate of below, but close to, 2%. This is the only goal that our unconventional measures are also bound by. And price stability is an exclusively internal objective – the ECB does not pursue an exchange rate policy. Nevertheless, the longer it takes to achieve this goal, the greater the risk that the side effects of our measures become stronger, especially of the negative rates.
Yves Mersch: Behaving responsibly in a low interest rate environment - a central banker's perspective Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the Stiftung Marktwirtschaft: Expertentagung "5th Kadener Gespräch", Alveslohe, 10 February 2017. * * * The policy of the European Central Bank (ECB) is often said to be at the root of the current problems in the banking and financial sector. Particularly in Germany, there’s the added accusation of monetary policy “expropriating” savers. A closer look quickly reveals that such hasty judgements fail to appreciate the complexity of the matter. Today, therefore, I shall examine carefully the underlying reasons for our monetary policy action. By focusing on the reasons for our actions we can understand more easily how to get back to a normalisation of monetary policy. Low natural interest rates Why are interest rates so low? The growth trend has been declining in many mature economies not just since the crisis, but for several decades. This slowdown in growth has led to lower long-term interest rates. The structural causes of this trend of slowing growth is a subject of controversy among specialists. Demographic and technological developments are mentioned, as are the effects of the financial cycle, which may be out of sync with the business cycles. I do not want to pre-empt this ongoing discussion.