sabine lautenschlager : monetary policy – what's next? statement by ms sabine lautenschlager, member of the executive board of the european central bank and vice - chair of the supervisory board of the european central bank, at the eurofi financial forum, tallinn, 15 september 2017. * * * monetary policy has changed significantly since the financial crisis. for many years we have pursued a highly expansionary monetary policy stance. during that time, monetary policy has also become quite unconventional ; we have deployed a range of different non - standard measures. but now, markets, banks and savers are waiting for it to become more conventional again. and there ’ s no doubt that monetary policy will return to normal. the question is when. that is the first challenge. we need to find the right moment. the conditions are all in place for inflation to reach a stable trend towards our goal : below, but close to, 2 % in the medium term. the conditions for that are all in place. growth has returned to the euro area, and so have jobs. we can look back on 17 quarters of economic growth and an unemployment rate that has fallen from around 12 % to around 9 %. this has given a boost to demand ; people have started spending again. and the recovery is not confined to a few countries ; it has taken hold across the euro area. given all of that, inflation should pick up. and it is picking up, but less quickly than one would expect. so what is holding it back? well, there are a couple of things – oil and commodity prices, for instance. they suppress headline inflation and make it more volatile. and they also affect core inflation. and there is another issue : the headline unemployment rate seems to miss some of the slack in the labour market. so the economy might be a bit further away from full potential than would appear to be the case at first sight. that, of course, holds inflation down. at the same time, a long period of low inflation has an impact on how wages and prices are set. this is particularly problematic when prices and wages are indexed to inflation. this effect should wash out over time, though. in any case, we can conclude that inflation is taking a bit longer than usual to pick up. so some monetary accommodation is still needed to bring inflation back on a stable trend towards our goal. but to a large extent, this accommodation is being provided by the standard monetary policy measures and by the

bank of japan presents its quarterly economic outlook for winter 1997 bank of japan, quarterly bulletin, february 1997 ( advance summary ). 1. a moderate economic recovery continues in japan as private demand shows increasing firmness. among final demand items, public - sector investment has begun to decrease while net exports have started to rise. housing investment has remained at a high level and business fixed investment is also increasing steadily. while the increase in personal consumption has been moderate on the whole, passenger car sales have recently increased at a faster pace. meanwhile, inventories are generally at appropriate levels. in these circumstances, industrial production is increasing and recently, in particular, the pace of growth has accelerated to some extent. labor market conditions have continued to improve moderately. prices have stopped declining on the whole. domestic wholesale prices ( adjusted for seasonal electricity rates ) have almost stopped declining, reflecting the depreciation of the yen and the rise in oil prices to date as well as the moderate improvement in domestic supply and demand conditions, particularly in construction goods. the year - to - year decline in corporate service prices is narrowing gradually. consumer prices ( nationwide, excluding perishables ) are marginally above the previous year ’ s level. land prices continue to weaken on the whole, but there are some signs of improvement in the supply and demand conditions. on the balance of payments, the real trade surplus has recently started to increase and the nominal current account surplus is also rising moderately. 2. in the financial markets, the overnight call rate ( uncollateralized ) has stayed slightly below the official discount rate, and the 3 - month cd rate has remained at 0. 50 - 0. 55 per cent since autumn 1996. the long - term government bond yield has been declining since july 1996, and it marked a record low of 2. 3 - 2. 4 per cent in early december and has recently remained at around 2. 4 per cent. stock prices have declined substantially since the end of 1996. the yen has been depreciating since the end of 1996, particularly against the u. s. dollar. meanwhile, growth in lending by private financial institutions has continued to be slow, owing both to weak corporate demand for new funds and to an increase in capital market financing. monetary aggregates in terms of m2 + cds average outstanding, however, have continued to grow at over 3. 0 per cent. 3. to gauge future developments of japan ’ s economy in the context of individual components of final demand, public -