Therefore, once it transpires that the supply shock is likely to be of a permanent nature because it is passed through to price and wage setting behaviour, the ECB would act.9 But the flexibility in the policy-relevant time horizon grants it sufficient time to identify whether the shock is transitory or permanent before changing course.
This, in turn, allows for a steady-hand approach to our monetary policy that avoids undue policy-induced economic fluctuations. Third, adding to the flexibility deriving from the price stability definition and the variable policy horizon, the ECB has large scope in adopting further tailored measures to address specific market impairments.