ECB Governing Council member Olli Rehn said stubbornly low inflation expectations could be a result of investors’ doubt of the central bank’s policy. he said “firstly, long-lasting slow inflation may have lowered inflation expectations durably, and even so that they are easily moving downwards”. And “secondly, markets may find that monetary policy measures are not, under the current circumstances, effective enough to accelerate inflation.”
Additionally, Rehn hinted that some policymakers could prefer to keep interest rate at current level beyond the end of this year. He said “some of us were of the opinion that the low interest rate policy could have been pursued even a little longer”. And, “in this situation of economic uncertainty and weaker growth, there are reasons to pursue a very stimulating monetary policy.”
