If people are convinced that the central bank will ultimately succeed in maintaining price stability, inflation expectations will remain centred on the central bank’s objective – also in face of significant temporary price shocks, so that price and wage-setting behaviour will remain consistent with price stability.
Like other major central banks, we are faced with the task of normalising monetary policy at a point in time that is anything but normal. In this difficult situation we will guarantee medium-term price stability, just like we protected the euro area economy from deflation during the pandemic. Normalisation does not mean removing stimulus outright.