The first and obvious would be an expected persistent undershoot of the target itself. But I simply cannot see how this is possible. Of course, headline inflation rates will come down sharply next year and may turn briefly negative. But the trend will probably reverse again in the second half, when the sharp falls in oil and commodity prices are no longer in the index. For the eurozone, the ECB's own officials are forecasting annual inflation of between 1.1 per cent and 1.7 per cent next year and between 1.5 per cent and 2.1 per cent in 2010. These forecasts suggest that the ECB is more or less on target right now.

The second explanation is that the central banks attach a small but positive probability to a liquidity trap, a situation in which an economy hits such a downward spiral that monetary policy becomes ineffective. To avoid such a calamity, they may be prepared to cut interest rates below the rate that would otherwise be consistent with their own forecasts. There is a price to be paid for such insurance.

It comes in the form of an increased risk of inflation later. Those who defend such insurance say the two risks are asymmetric and therefore worth taking. Twenty per cent inflation, they say, is ultimately not as harmful as 5 per cent deflation.