ECB Chief Economist Philip Lane said in a speech that “medium-term inflation expectations have been increasing from a low base towards the two per cent inflation target over the last year, even before the energy shock.”
“There are several factors indicating that the excessively-low inflation environment that prevailed from 2014 to2019 (a period over which inflation averaged just 0.9 per cent) might not re-emerge even after the pandemic cycle is over,” he added.
“If the medium-term inflation dynamic is anticipated to stabilise around the two per cent target, this will permit a gradual normalisation of monetary policy,” he said. “Whereas if inflation threatens to persist significantly above the two per cent target over the medium term, a tightening of monetary policy will be required.”
