been revised down by 0. 1 percentage points in 2019 and 2021, and by 0. 4 percentage points in 2020. although the downward revisions to headline inflation are partly due to the volatile energy component, projections for hicp inflation excluding food and energy have also been revised down on account of weaker data outturns, softer activity, indirect effects from lower energy prices and persistent past over - predictions. last week ’ s policy meeting also took place against the background of a pronounced fall in risk - free rates that we have been observing since the start of the year. in part, this is a global pattern, with us long - term yields also declining ( chart 13 ). this suggests that there is a substantial shared component in the decline in long - term rates that reflects a significant weight being attached to sub - par long - term outcomes for growth and inflation across advanced economies. chart 13 ten - year yields of german and us government bonds ( percentages ) https : / / www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp190916 ~ ca7... 16. 09. 2019 reflections on monetary policy page 11 of 18 sources : bloomberg and ecb. latest observation : 10 september 2019. the downward revision in long - term yields incorporates the market ’ s assessment that central banks will respond ( both in the near term and the long term ) to adverse developments in the inflation outlook by lowering policy rates and further contributing to the easing of financial conditions through the compression of term premia ( chart 14 ). while the lower rates that we have observed have contributed to an overall loosening of financial conditions since the start of the year, it is important to keep in mind that long - term rates that are declining due to a deterioration of the economic outlook, an adverse shift in the risk distribution or revised calculations of the equilibrium real interest rate offer only limited easing potential, especially if they are not backed up by active use of the policy toolkit. chart 14 realised eonia and forward curve ( percentages per annum ) source : ecb. https : / / www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp190916 ~ ca7... 16. 09. 2019 reflections on monetary policy page 12 of 18 monetary policy at our meeting last week, the governing council was hence confronted with a more extended slowdown of the euro area economy than previously anticipated

, no 232, ecb. the recent jackson hole paper by jorda, o. and taylor, a. m. ( 2019 ) provides an analysis of the inter - relationships between longterm rates, short - term policy rates, macroeconomic variables and the measurement of the policy stance. for an empirical review of the effectiveness of the different elements of the ecb ’ s monetary policy toolkit and the sources of complementarities across these instruments see my recent speech “ monetary policy and below - target inflation ”, bank of finland conference on monetary policy and future of emu, 2 july. see ryan, e. and whelan, k. ( 2019 ), “ quantitative easing and the hot potato effect : evidence from euro area banks ”, research technical paper, no 1, vol 2019, central bank of ireland ; and demiralp, s., eisenschmidt, j. and vlassopoulos, t. ( 2019 ), “ negative interest rates, excess liquidity and retail deposits : banks ’ reaction to unconventional monetary policy in the euro area ”, working paper series, no 2283, ecb. for further discussion, see my recent speech “ monetary policy and below - target inflation ”, bank of finland conference on monetary policy and future of emu, 2 july. for further discussion, see ecb ( 2019 ), “ taking stock of the eurosystem ’ s asset purchase programme after the end of net asset purchases ”, economic bulletin, issue 2. for further discussion, see my recent speech “ monetary policy and below - target inflation ”, bank of finland conference on monetary policy and future of emu, 2 july. european central bank directorate general communications sonnemannstrasse 20, 60314 frankfurt am main, germany tel. : + 49 69 1344 7455, e - mail : media @ ecb. europa. eu website : www. ecb. europa. eu reproduction is permitted provided that the source is acknowledged. https : / / www. ecb. europa. eu / press / key / date / 2019 / html / ecb. sp190916 ~ ca7... 16. 09. 2019 reflections on monetary policy page 18 of 18 media contacts related topics policies monetary policy protectionism trade labour market key ecb interest rates asset purchase programme ( app ) euro overnight index average ( eonia ) forward guidance targeted longer - term refinancing operations ( tltros ) deposit