se the ECB can support inflation through (1) lower yields and thus a lower cost of borrowing, (2) more liquidity and in that manner more accessible loans to the private sector, (3) a weaker euro, which supports exports and gives higher imported inflation, and (4) improved self-confidence, which supports demand.
There are a lot of instruments left in the toolbox of the ECB but some of these are of an extremely non-conventional nature. This said, only two years ago, cutting the deposit rate and pronouncing a broad-based QE programme could have already been seen by many analysts as very non-normal.
The remaining tools of the ECB contain the following.
1. Stronger forward guidance, which might incorporate an alternate interpretation of the inflation target.
2. Additional and more aggressive rate cuts.
3. QE growth or by including more risky assets such as corporate bonds, equities as well as non-performing loans in the QE universe.
4. Provide additional liquidity or declare new (T)LTRO loans where banks can borrow in a negative rate.
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