Panetta: Patient monetary policy amid a rocky recovery
From ecb.europa.eu
The long and rocky road out of the pandemic is creating challenges for monetary policy. Following years of too-low inflation and policy oriented at addressing deflationary risks, we are now in an environment of two-way inflation risks and heightened short-term volatility (Chart 1). Markets are indicating increasing uncertainty about the inflation outlook, and investors’ expectations of lift-off dates have become more dispersed. In this environment, central banks must clarify their reaction function, so that market expectations remain aligned with their policy intentions. This, in turn, requires a clear framework for ...
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