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11 Oct, 4 tweets, 2 min read
(THREAD) Inflation needs to reach 2% well ahead of the end of our projection horizon and durably for the rest of it, says Chief Economist Philip R. Lane opening the ECB Conference on Monetary Policy. Speech ecb.europa.eu/press/key/date… 1/4
Lane: Our interest rate policy should not react to inflation shocks expected to fade before the end of our projection horizon. We need to see realised progress in underlying inflation 2/4
Lane: A one-off shift in the level of wages as part of the adjustment to a transitory unexpected increase in the price level does not imply a trend shift in the path of underlying inflation 3/4
Lane: Calibrating the volume of asset purchases plays an important role in ensuring that the monetary stance is sufficiently accommodative to deliver on our inflation target in a timely manner ecb.europa.eu/press/key/date… 4/4

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More from @ecb

European Central Bank Profile picture
8 Oct
(THREAD) Without proper regulation, the expansion of digital finance could amplify international shocks and undermine financial resilience globally, says Executive Board member Fabio Panetta.
Read the speech ecb.europa.eu/press/key/date…
1/4
Panetta: We could see risk-biased technological change, whereby the confluence of big techs’ increasing role in finance and the growth of digital assets such as crypto-assets and stablecoins could bring about sudden and disruptive risks for the global economy 2/4
Panetta: We will need domestic and international cooperation among the relevant authorities to contain the risks that digital finance poses to public policy goals such as financial stability, fair competition, anti-money laundering efforts, consumer protection and privacy 3/4
Read 4 tweets
European Central Bank Profile picture
8 Oct
(THREAD) Measuring how people and firms expect inflation to develop is not easy. That’s why we focused on surveys of professional forecasters and on market-based indicators, such as the implications of relevant market prices ecb.europa.eu/pub/pdf/scpops…
1/5
Our research suggests longer-term inflation expectations have become less well anchored in the euro area since the global financial and European debt crises, although different metrics point to conflicting signals about the timing and scale of this process
2/5
As well as working as standalone forecasts, we found inflation expectations can benefit forecasting when included in modelling and can inform scenario and risk analysis
3/5
Read 5 tweets
European Central Bank Profile picture
8 Oct
(THREAD) Between 2013 and 2019, average inflation in the euro area was 1%, well below our inflation target.
We looked at the reasons behind this as part of our recently concluded strategy review ecb.europa.eu/pub/pdf/scpops…
1/4
The persistently low inflation of the last decade can be attributed to a combination of factors. Cyclical developments played a substantial role, while underestimations of economic slack and the divergence of inflation expectations from our objective were also important
2/4
Structural trends like globalisation, digitalisation and demographic factors also likely contributed to low inflation, despite not being main drivers. This is because they could not be easily offset by interest rate policy when rates were close to lower limit
3/4
Read 4 tweets
European Central Bank Profile picture
28 Sep
(THREAD) The economy is back from the brink, but not out of the woods, says President Christine @Lagarde in her opening speech at the #ECBForum on Central Banking.

After an unusual recession, the euro area is going through a highly atypical recovery ecb.europa.eu/press/key/date…

1/4
Lagarde: This atypical recovery is leading to rapid growth, but also to supply bottlenecks appearing unusually early in the economic cycle.

The pandemic has also introduced new trends that could produce both upward and downward price pressures.

2/4
Lagarde: These trends include

1⃣ Demand side changes, e.g. people spending their extra savings
2⃣ Supply side changes, e.g. faster digitalisation
3⃣ Faster implementation of the green transition

3/4
Read 4 tweets
European Central Bank Profile picture
8 Jul
(THREAD) President Christine @Lagarde today presented the outcome of our monetary policy strategy review in a press conference and answered questions from journalists. Here are some of the main points ⬇️ 1/7
A new price stability objective
We have amended our formulation of the price stability objective to a two per cent inflation target over the medium term. This gives more clarity about our objective and helps better anchor inflation expectations 2/7
A symmetric target
The Governing Council’s commitment to the two per cent target is symmetric. Symmetry means that we consider negative and positive deviations of inflation from the target to be equally undesirable 3/7
Read 7 tweets
European Central Bank Profile picture
8 Jul
ECB’s Governing Council approves its new monetary policy strategy. Full press release ecb.europa.eu/press/pr/date/…
The ECB’s monetary policy strategy statement ecb.europa.eu/home/search/re…
ECB presents action plan to include climate change considerations in its monetary policy strategy. Full press release ecb.europa.eu/press/pr/date/…
Read 4 tweets

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