- The current short-term inflationary pressure may spill over to inflation expectations, leading to more protracted inflationary pressures
- If we were to see clear signs of a de-anchoring of medium-term inflation expectations, we would accelerate the pace of stimulus withdrawal
- We could go further and adopt a restrictive stance if necessary
- For now, we do not see this “ugly inflation” scenario materialising
- The natural way forward would be to start raising interest rates while keeping the stock of assets purchased under the APP and PEPP constant
- We currently intend to end net asset purchases in Q3
- Once net asset purchases have come to an end and the stock is being reinvested, rate policy will be clearly superior to balance sheet policy as the main tool
- Full remarks
A lot of this talk is conjecture at this point but you sort of get the message. The ECB is laying out the idea of how they want to go about things when delivering rate hikes but I would not expect it to be that straightforward.