##se 14, 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated. mestic market are limited by european rules to a maximum of 2 %. yet the resulting capital buffers could be insufficient to actually cover systemic risk. evaluation therefore means making the costs and rewards of the reforms for society as a whole more transparent and disclosing any unintended side - effects. the evaluation of the reforms should not be used as a pretext to water them down or weaken the resilience of the financial system. * * * page 9 of 9 deutsche bundesbank, directorate general communications wilhelm - epstein - strasse 14, 60431 frankfurt am main, germany, tel : + 49 ( 0 ) 69 9566 3511, fax : + 49 ( 0 ) 69 9566 3077 presse @ bundesbank. de, www. bundesbank. de reproduction permitted only if source is stated.

who lived through the 1970s and 1980s, the specter of high inflation probably still looms large. but millennials and generation z have never faced the prospect of paying 15 percent on a mortgage. it ’ s often claimed that we don ’ t really understand what drives inflation expectations. but, in fact, researchers have made significant progress on this topic. research using a number of approaches has found that the history of inflation plays a big role in inflation expectations. now, this does not mean that expectations are a mechanical average of past inflation, like in traditional versions of adaptive expectations. instead, the key finding of this research is that inflation expectations depend on the historical behavior of inflation as shaped by the conduct of monetary policy. for example, recent work using the new york fed ’ s survey of consumer expectations shows a decline in longer - run inflation expectations by nearly half a percentage point over the last six years, to about 2 - 1 / 4 percent. 7 this decline reflects both the low cpi inflation of recent years and demographic shifts, where members of older cohorts with high expectations ( i ’ m afraid to say ) die off. 2 / 4 bis central bankers'speeches if inflation continues to underrun target levels similar to the past six years, the downward trend in inflation expectations will likely continue. but there is still time to avert this fate — in this case, it ’ s fortunate that the young are impressionable. if inflation is sustained at target levels consistently, a further downward trend in expectations can be forestalled. but expectations depend on deeds, not just words, which brings me to the issue of accountability. one reason inflation targeting has been so successful at keeping inflation low and stable is that policymakers held themselves accountable for consistently delivering low inflation near the target. finally, as well as holding ourselves accountable, policymakers need to be transparent and communicate their actions and the rationale behind them. much has been made about whether central banks can credibly commit to future actions and outcomes, but the experience with inflation targeting gives me encouragement. inflation - targeting central banks have proved beyond a doubt that they could bring inflation down and keep it low and stable. this was not a foregone conclusion, and initially there were doubts about whether inflation targeting would succeed. in addition, forward guidance delivered in the years following the financial crisis had a clear and direct effect on driving policy expectations and financial conditions. keeping inflation expectations anchored at the right point will depend not just on policymakers holding themselves accountable for