radical monetary policy experiments of modern times ” to “ quasi fiscal policy ”. and of course qe ’ s efficacy in europe is of global significance, if only one takes into account the euro area ’ s big share in world output – not to mention the reactions of other central banks ( e. g. in switzerland, denmark, sweden, etc. ). last but not least, i will look into the challenges and risks that lie ahead for the overall stance of economic policy in europe. ii. low inflation or deflation? before starting to unfold these issues, please allow me to explain why it is that we talk about low inflation, rather than deflation, in the euro area. in february 2013, euro area inflation fell below the 2 % mark and has since been on a continuous downward trend for more than two years. according to the latest report of the ecb survey of professional forecasters ( spf ), low inflation is expected to be quite prolonged, but gradually rise to 2 %. according to eurostat ’ s flash estimate, euro area annual hicp inflation was zero last month, – 0. 1 % in march, up from – 0. 3 % in february 2015 and – 0. 6 % in january 2015, despite the fact that both bis central bankers ’ speeches measures of money supply, the broad m3 and the narrow m1 have been picking up this year ( by 4. 5 % and 9. 5 % year - on - year respectively in the first quarter of 2015 ). inflation is expected to remain very low or slightly negative in the coming months, with an annual inflation projection of 0. 1 % on average for the year 2015, against a yearly average of 0. 4 % in 2014. it is also true that in advanced economies, the inflation rate will stand at 0. 4 % on a yearly basis in 2015, according to the latest imf forecasts, which is the lowest level in the last 30 years. however, inflation rates are projected to rise consistently over the short - and medium - term and reach 1. 5 % by next year. although in the euro area, there is more than a 50 % risk of the inflation rate hovering below one percent in the short - run, the risk of deflation is quite low at less than 10 percent in the short term ( in the next one to two years ) and effectively zero ( 1 % risk ) in the longer term ( in the next five years ), as shown in chart 1.

- year forward five - year ahead implied rate declined in 2014. currently it is hovering around 1. 7 %, slightly lower than the ecb ’ s spf ( 2015q1 ) results. bis central bankers ’ speeches as far as financial markets are concerned, the impact of the asset purchase programme accounts for most of the fall in euro area long - term sovereign bond yields since last december, as market participants anticipated the ecb ’ s qe programme. government bonds across a wide range of euro area countries traded at historically low and often negative yields. the decline was most pronounced in the longest maturities, with yields on french and german 10 - year bonds falling by around 60 basis points, while those on italian and portuguese bonds of the same maturity shrank by 70 and 90 basis points, respectively. yields on corporate euro - denominated debt have also gone done while the major european stock markets have risen from the end of 2014 by 17 % approximately ( chart 3b ). [ note : charts 3a and 3b do not capture the recent bond sell - off in early may, which was in my view a market reaction to an overshooting of euro area sovereign bond prices following the qe ’ s formal announcement by the ecb in january of this year. ] a case in point is that from just before the announcement of the ecb ’ s expanded asset purchase programme on 22 january to the close of business the day after, german 20 - year maturity yields fell by almost 25 basis points and italian 20 - year maturity yields fell by almost 35 basis points. furthermore, as we mentioned earlier, the euro depreciated by 11 % since last december, hitting a 12 - year low against the dollar ( chart 3a ). on the other hand, the effectiveness of the ecb ’ s qe programme in terms of contributing to a robust recovery in the euro area should have a significant final impact on the global economy and indeed in this part of the world. such an accommodative policy that aims to raise ultimately consumer confidence in the euro area, obviously stimulates imports from the rest of the world. an illustration of this is that total eu trade with asia reached €1. 03 trillion last year, almost double the value recorded a decade ago and, at the same time, the eu accounted for 22, 4 % of asian trade in 2014, with most of eu imports coming from china ( 6. 7 % of total eu imports ). the eu is also a