the central bank should not be even more patient in trying to bring inflation back to levels in the proximity of the upper ceiling of the price stability range. in this line of thinking, low inflation today is predominantly being driven by global factors which will ultimately unwind if given sufficient time to work through the economy. due to inertia in the wage and price formation process, there is no particular risk of bouts of very low or even negative inflation feeding into sustained deflation. the central bank should therefore emphasise its medium - term orientation and extend the policy horizon until inflation returns to the desired level. second, others have queried whether it is justified for the ecb to be so attached to its focal point of below but close to 2 % at all. any rate of inflation between 0 % and 2 % would be equally consistent with our price stability definition, this argument goes. indeed, when inflation is at the lower end of the range and conventional policy tools are close to exhausted, the costs of using unconventional measures to drive inflation up outweigh the benefits in terms of preparing the ground for higher inflation in a not so distant future. the central bank should thus not be obsessive about delivering on its aim of a close to 2 % inflation rate. let me address each of these issues in turn. how patient can a central bank be? on the face of it, the argument that central banks can tolerate periods of too - low inflation is correct. inflation can move temporarily below – or above – our aim without requiring an immediate policy response. that is the implication of our medium - term orientation, which gives the central bank discretion over whether to react to short - run macroeconomic fluctuations. yet that discretion is always bounded by two factors : the nature of the shocks hitting the economy ; and the credibility of our objective in the face of those shocks. if the economy has been hit predominantly by demand shocks, there is no case for the central bank to delay policy action. both economic activity and inflation will tend to move in the same direction, presenting the central bank with an unambiguous policy prescription, which is to make its monetary policy more accommodative for a negative shock, and less accommodative for a positive one. the medium - term in this case is the shortest period in which we can realistically bring inflation back to our objective, which is equal to the length of the monetary transmission lag. bis central bankers ’ speeches however, if inflation developments are being

john thornton ( 1992 ), “ determinants of european bank profitability : a note. ” journal of banking & finance 16. 6 : 1173 – 117. athanasoglou, panayiotis p., sophocles n. brissimis, and matthaios d. delis ( 2008 ), “ bank - specific, industry - specific and macroeconomic determinants of bank profitability. ” journal of international financial markets, institutions and money 18. 2 : 121 – 136. bikker, jacob a., and haixia hu ( 2001 ), “ cyclical patterns in profits, provisioning and lending of banks and procyclicality of the new basel capital requirements. ” research series supervision 39. 7 for example in the corporate governance requirements for credit institutions 8 behaviour and culture of the irish retail banks, july 2018 9 see the central bank of ireland report on ‘ demographic analysis - applications for pre - approval controlled function ( pcf ) roles in regulated firms – 2017 ’ 6 / 6 bis central bankers'speeches