ECB Governing Council member Olli Rehn said, “We are seeing signs of second-round effects. It’s important that we send a signal that these higher inflation expectations we are currently witnessing will not become entrenched.”

It’s “reasonable that we will rather sooner, in my view in July, start raising rates in line with our normalization of monetary policy. And would expect that when autumn comes, we would be at zero,” he said.

Rehn also noted that the Ukraine war is hampering Eurozone’s economic recovery from the pandemic. “We are seeing some stagflation tendencies,” Rehn said. The Governing Council should ensure that monetary decisions don’t derail economic growth, but at the same time avoid inflation becoming entrenched, Rehn said.

ECB Governing Council member Olli Rehn said today, “We are almost in between a rock and a hard place so that on one hand we have to ensure that the recovery will continue. On the other hand, we have to prevent higher inflation expectations being entrenched and being reflected in the labor market.”

“In other words, we have to avoid second-round effects. Therefore, in my view, we should move relatively quickly to zero and continue our gradual process of normalization of monetary policy as we have done,” he continued.

“Of course, all this on the condition that Russia’s war in Ukraine will not substantially escalate and intensify which could derail all the forecasts and the economic recovery.”

ECB Governing Council member Francois Villeroy de Galhau said, “the three conditions of our forward guidance on interest rates are, according to my personal judgment, fulfilled. Barring unforeseen new shocks, I would think it reasonable to have entered positive territory by the end of this year.”

But he’s vague on the timing of the first hike, as “while I wouldn’t preclude the next few Governing Council meetings, I would rather set a marker a bit further down the road.” He added the ECB’s push to normalize policy “will be guided by an active use of optionality and gradualism.”

On asset purchases, Villeroy said “seen from today the case for continuing to press the accelerator and adding further net purchases after June is not obvious.”

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”

Full speech here.