ECB Chief Economist Philip Lane said in a speech, “in thinking about the normalization process, gradualism is an important consideration.” There are two basic reasons that make the timeline of completing normalization “intrinsically uncertain”.
Firstly, ” the feedback loop between various steps in the policy normalisation process and inflation dynamics needs to be incorporated into the monetary policy decision process”.
Secondly, “high uncertainty about the economic impact of the war in Ukraine, the energy shock and the post-pandemic recovery suggests that it is unlikely that the economy will quickly settle into a new steady-state equilibrium.”
Lane reiterated that the calibration of policies will “will remain data-dependent and reflect our evolving assessment of the outlook”
