reduced and monetary transmission has become much more homogeneous across member states than was the case during the crisis. third, the app has supported the strong economic expansion i talked about earlier. fourth, and perhaps most importantly, the tail risk of a 1930s type deflationary spiral has been averted. in doing so, the programme has achieved what could reasonably be expected from it. with deflation risk clearly off the radar, the main rationale for employing the app has therefore ceased to exist. fear of relapse owing to an alledgedly premature discontinuation of net purchases seems rather overdone. the programme has simply run its course. continuing the programme for the sake of fine - tuning inflation rates to precise values below, but close to, 2 % suggests a degree of control over the inflation process that is at least debatable. risks and side effects at the same time, continued monetary expansion is not a free lunch. unconventional policy measures can have unconventional consequences that even professional economists cannot always oversee. a prolonged period of low interest rates, ample liquidity and prominent central bank intervention in markets has given rise to potential misallocation of credit and wider resources toward zombie firms. 5 risk premia are compressed to a point where they no longer reflect the assets ’ inherent risk characteristics. the dynamics of preventing financial markets to adequately price risks for an extended period of time takes our economies into largely uncharted territory. these financial stability risks also need to be considered when assessing our monetary stance. while some would argue that prudential and not monetary policies should address financial stability risks, i tend to agree with former bank of england deputy governor charles bean that there are “ important qualifications to this somewhat panglossian view of the ability to maintain both price stability and financial stability by assigning monetary policy to the former and macroprudential policy to the latter. ” 6 after all, only monetary policy sets “ the universal price of leverage ”. 7 conversely, materialization of financial stability risks can also become detrimental to price stability. viral acharya, tim eisert, christian eufinger, and christian hirsch, “ whatever it takes : the real effects of unconventional monetary policy ”, safe working paper series, no. 152, 2017. charles bean, “ the future of monetary policy ”, speech at the london school of economics, london, 20 may 2014. claudio borio and mathias drehmann, “ financial instability and macroeconomics : bridging the gulf ”, september

factors are global in nature and largely outside the realm of individual central banks. they have altered domestic inflation processes and have thus complicated the life of central bankers around the world. 2 chart 2 : euro area gdp growth euro area real gdp growth quarter - on - quarter percent change 1, 0 0, 8 0, 6 0, 4 0, 2 0, 0 - 0, 2 - 0, 4 - 0, 6 the inflation outlook i would nonetheless argue that the current low inflation rates, despite falling short of our medium - term objective, do not constitute a threat to price stability. the current inflation outlook should be assessed against the background of a robust expansion of the eurozone economy. as chart 2 illustrates, the euro area is currently enjoying its fifth consecutive year of gdp growth. since mid - 2014 this growth can also be dubbed “ reflationary ”, in the sense that quarterly growth readings have consistently outpaced potential growth rates. claudio borio, “ through the looking glass ”, omfif city lecture, london, 22 september 2017. against the backdrop of a reflating economy, the inflation outlook is consistent with our aim of an inflation rate of below, but close to, 2 % over the medium term. it should be emphasized that from the ecb ’ s early days onward, the medium term has been defined as a flexible concept. it depends on the shocks hitting the economy and the efficacy of the monetary policy transmission that should bring inflation back on target. the global financial crisis was arguably much deeper than the average shock foreseen at the euro ’ s inception, and the financial fragmentation it created within the euro area severely impeded monetary transmission. in a context of such widespread financial imbalances, the ecb ’ s first chief economist, otmar issing, argued that “ there is little sense in continuing to pursue an inflation forecast for consumer prices over a horizon of one to two years. in such circumstances it may instead be advisable to set interest rates with a view to a time frame extending well beyond conventional forecast horizons. ” 3 concerns have been voiced that a prolonged period of low inflation could lead to a de - anchoring of inflation expectations. while the conceptual relevance of this argument is beyond dispute, there are some challenging issues in operationalising it in the monetary policy process. market - based and surveybased measures of inflation expectations exist, but they both come with a range of caveats and have often provided conflicting signals as to whether inflation expectations were anchored