Chart 3: Euro area business cycle and monetary policy decisions Euro area business cycle and monetary policy decisions PMI number on y-axis, with 50 marking difference between business cycle expansion and contraction 65 60 55 50 45 40 35 30 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Mean of PMI +/- ½ standard deviation Composite Purchasing Managers’ Index (PMI) index Policy easing (rate decrease or APP decision/expansion) Policy tightening (rate increase)  A simple historical comparison serves to illustrate this point.
Chart 3 shows that during previous upturns, that is when the euro area composite Purchasing 8  Managers’ Index (PMI) stood at similar levels above its long-term mean, policy was generally tightening instead of the current prolonged easing.8 Obviously, the main factor underlying this contrasting pattern is the weak and elusive character of the traditional Phillips curve relationship between cyclical conditions and inflation.