Rather than detailed calculations of the impact of specific shocks, as embodied in the old underlying inflation measure, the PTA now explicitly acknowledges that outcomes will occasionally fall outside the target range for a variety of reasons, even when the Bank is “constantly and diligently” striving to deliver price stability.
Challenges for monetary policy The past thirteen months have been the most challenging of the ECB’s ten-year history. We have experienced significant, multiple and coincident shocks, notably the emergence of financial tensions and sustained significant increases in commodity prices. The latter has led to worryingly high rates of inflation. These shocks have created an extremely complex and challenging environment for central banks.