Should the ECB prefer running the risk of doing too much compared to the risk of doing too little? There is no question that the tightening of the euro area monetary stance must continue to ensure that a temporary increase in inflation caused by a supply shock does not become a more persistent phenomenon sustained by demand factors.
This said, in early February the Governing Council of the ECB assessed that the risks to the inflation outlook have become more balanced, while reiterating that uncertainty remains very high. In this context it has raised its key rates by 50 basis points and has announced the intention to raise them by a further 50 basis points in March.