Carlo Bastasin – “The European Central Bank (ECB) has recently acknowledged the dangers of a prolonged period of overly low inflation in the euro area. In fact, in recent months inflation developments have continued to surprise on the downside. The level of consumer prices has declined from a high of more than 3 percent at the end of 2011 to a low of 0.3 percent in the last months, and recent weakness in wage growth casts doubt on the possibility that domestic price pressures will strengthen in the near future. The latest ECB staff projections foresee that by the end of the projection horizon, annual Harmonized Index of Consumer Prices (HICP) inflation will still fall short of its target of a rate of inflation of below, but close to, 2 percent over the medium term. According to the central bank, “recent data concerning medium-to-longer term inflation expectations are acknowledged as a cause for extra vigilance. In other words, the main goal of ECB monetary policy, i.e. price stability, is at risk as market participants expect inflation to remain well below 2 percent in the next five to 10 years. The dreaded scenario of prolonged low inflation seems more realistic today than it ever has in the past.”