While this is an important step towards policy normalisation, we are also of the opinion significant monetary policy stimulus continues to be needed to support the further build-up of domestic price pressures. Hence, we reiterated the forward guidance on the reinvestment and on policy rates, implying that we do foresee a very gradual process of policy normalisation.
It should come as a useful and timely wake up-call for those who are, in effect, contemplating watering down the institutional foundations of the euro’s stability. Reforming the Stability and Growth Pact under the pretext of rendering it more growthfriendly would be the wrong path to take. There is no such thing as the alleged trade-off between economic growth and fiscal prudence!