In the past cycle, many practitioners have questioned the ability of the ECB to raise inflation. Figure 1 (left frame) shows that the market-implied measure of inflation expectations, the 5Y5Y inflation swap, has constantly been declining in the past cycle and is currently sitting at 1.3%, far below the central bank’s 2 percent target. We notice a remarkable drop in the year following the euro area sovereign debt crisis; inflation expectations dropped from an average of 2.4% between 2004 and 2012 to 1.4% in the past 5 years. Previous studies have attributed the fall in