Slower-than-target inflation and a persistent decline in inflation expectations are key challenges for monetary policy. A negative equilibrium of prolonged low inflation and zero interest rates would fundamentally weaken monetary policy’s room for manoeuvre in balancing fluctuations in the economic cycle.

The Bank of Finland has calculated alternative scenarios on the effects of risks to the global economy. In these scenarios, global growth weakens more abruptly than currently forecast.

The summary provides a simple introduction to the assessment of developments in the global economy and monetary policy presented in the March edition of the Bank of Finland Bulletin.