ECB's Schnabel: Risks To The Inflation Outlook Are Tilted To The Upside

ECB's Schnabel: Risks To The Inflation Outlook Are Tilted To The Upside

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**THE PATH TOWARDS SUSTAINED PRICE STABILITY REMAINS UNCERTAIN AND FRAUGHT WITH RISKS

**PROFIT MARGINS EXPECTED TO ABSORB RISING LABOUR COSTS

**A MONETARY POLICY STANCE THAT ERRS ON THE SIDE OF DETERMINATION INSURES AGAINST COSTLY POLICY MISTAKES

**RULES SUGGEST THAT THE OPTIMAL INTEREST RATE PATH WOULD HAVE BEEN STEEPER

**THE FACT THAT WE UNDERESTIMATED INFLATION PERSISTENCE LAST YEAR RAISES THE PROBABILITY THAT WE ARE ALSO UNDERESTIMATING INFLATION TODAY

**GIVING MORE WEIGHT TO OBSERVABLE DATA, IN PARTICULAR AT TIMES OF HIGH UNCERTAINTY, CAN IMPROVE THE QUALITY OF POLICY DECISIONS

**THIS MEANS THAT WE NEED TO REMAIN HIGHLY DATA-DEPENDENT AND ERR ON THE SIDE OF DOING TOO MUCH RATHER THAN TOO LITTLE

**RISKS OF BOTH A DE-ANCHORING OF INFLATION Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term EXPECTATIONS AND WEAKER MONETARY POLICY TRANSMISSION SUGGEST THAT THERE IS A LIMIT TO HOW LONG INFLATION CAN STAY ABOVE 2%

**WE THUS NEED TO KEEP RAISING INTEREST RATES UNTIL WE SEE CONVINCING EVIDENCE THAT DEVELOPMENTS IN UNDERLYING INFLATION ARE CONSISTENT WITH A RETURN OF HEADLINE INFLATION TO OUR 2%

**A MONETARY POLICY STANCE THAT ERRS ON THE SIDE OF DETERMINATION “INSURES” AGAINST COSTLY POLICY MISTAKES