Inflation and the ECB’s monetary policy stance

The period of low inflation in the euro area ended abruptly with recovery from the Covid-19 pandemic and the energy crisis. Supply-side bottlenecks and a surge in energy prices were factors in raising core inflation. Despite the hike in consumer prices, the European Central Bank’s unprecedented monetary policy response helped to re-anchor long-term inflation expectations to the 2% target and prevent the materialisation of second-round effects.

In this breakfast briefing, Stefano Neri, head of the economic outlook and monetary policy directorate at Banca d’Italia, discusses long-term inflation expectations in the euro area, the limited risks of second-round effects, growth prospects and the ECB’s monetary policy stance.