ECB Executive Board member Isabel Schnabel said in a speech, “inflation will remain higher for longer than previously anticipated”. In will “decline over the course of next year”, but, “uncertainty has increased around the pace and extent of the slowdown”.
“In such situations of elevated uncertainty, monetary policymakers need to focus on the entire range of possible outcomes to ensure that they will be able to deliver on their mandate,” she added.
“On the one hand, this means avoiding the mistake of a premature tightening of monetary policy in response to a temporary and possibly short-lived inflation spike. ”
“On the other hand, it means keeping a watchful eye on the upside risks to inflation that financial markets currently anticipate and retain optionality to be able to act if needed, so as to maintain trust in our determination to defend price stability in a symmetric way and prevent a deanchoring of inflation expectations in both directions.”
