No. 1357 - The macroeconomic effects of falling long-term inflation expectations

The study analyses the effects of reductions in long-term inflation expectations on growth and inflation, and focuses on the role that monetary policy can play in counteracting these adverse effects.

The marked decline in long-term inflation expectations between 2013 and 2015 in the euro area contributed to keeping inflation at historically low levels. Had the ECB not adopted a very accommodative monetary policy, by means of non-standard measures, the decline in inflation would have been larger. The paper highlights the importance of monitoring long-term inflation expectations in the conduct of monetary policy.

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