. slide 8 association of higher inflation expectation with lower expected economic growth https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201124 ~ bcaebee7c0. en. html 8 / 13 24 / 11 / 2020 covid - 19 and monetary policy : reinforcing prevailing challenges other studies come to different conclusions, however. they find either no evidence of inflation expectations affecting consumption decisions or, more disturbingly, even suggest that higher inflation expectations could lower – rather than raise – consumption. one interesting pattern that can help explain these findings is that rising inflation expectations often seem to go hand - in - hand with expectations of lower incomes and lower economic growth ( see right chart slide 8 ). these findings suggest that individuals are far from being as rational and forward - looking as our canonical models assume. [ 23 ] indeed, controlling for these insights helps resolve the infamous “ forward guidance puzzle ”, i. e. the phenomenon that models predict that promises to keep rates low for longer will have unrealistically large effects on the real economy. bounded rationality may hence limit the efficacy of policies geared towards boosting inflation expectations, all the more so as new empirical evidence highlights that most households are very hesitant about adjusting their long - term inflation expectations in response to news. none of this is to say that monetary policy is powerless. on the contrary, current highly accommodative financial conditions provide a continuous and measurable support to the euro area economy. preserving them for as long as needed will be essential to ensure that inflation returns to our aim in the medium term. bounded rationality and the way the interest rate channel works at the lower bound rather suggest two things. first, fiscal policy has become more important as a macroeconomic stabilisation tool, also once we leave the pandemic behind us. and, second, if people associate higher inflation with worse personal economic outcomes, then we should become better in explaining to the public what it is that we do and why current low inflation may be harmful to growth and employment. trust in the ecb remains unacceptably low and has fallen over time, also as unconventional instruments have introduced concepts and terminology that are hardly accessible to a large part of our society ( see slide 9 ). new research demonstrates that trust has a tangible impact on households ’ inflation expectations. https : / / www. ecb. europa. eu / press / key / date

second category, and hence only civil responsibilities could be investigated on such behaviors in accordance with the contract law. moreover, some irregularities such as misuse of the investors ’ settlement funds for stock trading and trust funds of the customers have long existed in the financial sector, especially the securities sector and trust sector, which not only harm the legal interests of the public but also generate huge risks to financial institutions. however, since the existing criminal law only contains provisions against misuse of customers ’ funds by the staff of the financial institutions not that by the financial institutions, it fails to provide adequate deterrence for such a malpractice. it is undoubted that the lack of criminal punishment for the above frauds and irregularities will bring negative impact on reducing the operational risks in financial institutions. fourth, the lack of laws governing financial institutions and business will increase the potential risks in the financial system. as mentioned above, the increase of cross - market risks has become one of the new factors affecting the stability of china ’ s financial system, which is mainly due to the underdevelopment of laws to timely regulate the newly emerged financial institutions and business. for example, under the existing legal framework, although the financial holding companies are seemingly to be covered one way or another by certain provisions in laws such as the law of the people ’ s republic of china on the people ’ s bank of china, the commercial banking law of the people ’ s republic of china, the law of the people ’ s republic of china on banking regulation and supervision, the securities law of the people ’ s republic of china, and the insurance law of the people ’ s republic of china, none of them fully solve the supervisory problems. in terms of the financial business, to supervise various entrusted asset management business, the most active crossmarket financial products, the cbrc, csrc, circ each has its own supervisory standards to follow, and there is no unified supervision in this regard. since the existing laws fail to solve the problems confronted in the supervision of financial holding companies and to provide strict legal definitions for new financial business, potential risks are likely to increase and spread across different financial markets. according to the definition made by the basel committee, the cross - market risks undertaken by china ’ s financial institutions are in essence legal risks. iii. next step in optimizing the legal framework as china ’ s financial reform is accelerating, the task of preventing financial risks has become more important and challenging. given the innate risks associated with the