temporary rise in both inflation and unemployment. because the temporary rise in unemployment would damp price pressures, the chances that the initial oil price inflation would pass through into continuing inflation would be reduced. most likely, the initial inflationary boost would prove temporary, permitting the rise in unemployment to be temporary as well. but nominal income targeting has its own deficiencies. first, since a large share of u. s. oil is imported, a significant difference could exist between the value - added price deflator comprising nominal income and more - appropriate measures of true consumer price inflation. monetary policy makers would be better off focusing directly on these more - appropriate measures. second, as before, if prices were highly sensitive to supply shocks but not sensitive to output movements, even nominal income targeting could imply substantial increases in unemployment. core consumer price inflation is defined to exclude direct energy and food prices and hence more accurately measures the continuing effect of an oil price shock. a better approach would be to follow a policy rule based directly on target values of unemployment and some appropriate measure of inflation. one example is a taylor rule, under which monetary policy makers would move the short - term target interest rate - the federal funds rate in the united states - up or down to respond to deviations in core inflation and unemployment from their target values. 4 the results would be qualitatively similar to those of the nominal income targeting rule, with a temporary rise in both inflation and unemployment, though the increases would now be more keyed to underlying monetary policy objectives. because of the offsetting policy reactions, the real federal funds rate would be likely to remain approximately constant during this chain of events. if it did, the nominal funds rate would first rise and then fall with the inflation rate itself. while not a perfect outcome, this targeted intermediate approach is probably about the best that can be done. were policy to try to avoid any rise in unemployment, the initial oil price shock might get passed through to continuing inflation. were policy to try to avoid any rise in inflation, the movement in unemployment would be substantial. the best approach is likely to be to accept some temporary rise in both inflation and unemployment, with the increases being based on underlying objectives. the rises would be temporary so long as inflation did not persistently deviate from its long - term price - stability target. but even in this preferred approach, the widely watched nominal federal funds rate would likely rise for a time. current events with that backdrop, i will now turn to the current situation

i only wish to say that the governing council has demonstrated, over the years, that it has always had the ability, not just the will, to act. the ecb has always been able to act without being constrained by a supposed paucity of instruments. is “ helicopter money ” an option for the ecb? mario draghi already pointed out that the use of this instrument would be very complex and fraught with legal difficulties. the option has not been on the table, not even informally. will increasing the size of the debt purchase programme make it more effective? we haven ’ t actually seen it become any less effective. but it ’ s difficult to assess because it ’ s part of a package with the rest of the measures. what is important to note is that, when we saw the need to increase the volume of interventions to €80 billion a month, we could recalibrate and increase the range of eligible securities under our purchase programme. we don ’ t feel constrained by the instruments at our disposal. will the purchases of corporate debt help all companies and countries, or just the big ones? it ’ s true that most of the bonds available at present are issued mainly in only a few countries and by a limited number of large firms. but there are two things to note here. first, it ’ s the realignment of portfolios that matters. if we go into the market and purchase bonds for cash, the sellers can use that money to purchase other assets, including those issued by smaller firms and in other countries. the ecb ’ s purchases will be concentrated on just a limited number of bonds, but all bonds will benefit from the narrowing of spreads. second, markets are never static. currently, you may see a high concentration of issuance in a few countries by a few issuers. but, in our experience, markets are very unlikely to remain static. our presence in the market will also spur supply in countries where today supply is limited. bis central bankers ’ speeches