Comments from De Guindos:

  • Long-term inflation expectations are low
  • There are signs of tight labor market
  • Current low unemployment rate and the recent wage increases do not necessarily imply that higher inflation is around the corner
  • Structural changes are underway in advanced economies that imply that the pass-through may be on the decline
  • Monetary policy decisions need to be based on a wide-variety of economic indicators, not just the unemployment rate and wages

Translation: Our tools don't work and our view of how inflation works was wrong.