Independence is not a new concept to the ECB. Neither is accountability. We are proud of our independence, and in the context of supervision, the ECB needs to be safeguarded from external interests and national bias. With the activation of article 127/6, the provisions of the Treaty are extended to the new supervisory task. These include independence in the preparation of supervisory assessments.
In each of two scenarios, a Taylor rule is assumed to govern the response of the federal funds rate; the only difference between the two scenarios is that in one, the federal funds rate responds to core personal consumption expenditures (PCE) inflation, whereas in the other, it responds to headline PCE inflation. 6 Figure 1 illustrates the results of those two scenarios.