It’s not a question of slamming on the brakes – to stay with the imagery I used earlier on – but of taking our foot off the accelerator a little. Both the timing and the pace of monetary policy normalisation depend on the extent to which price pressures are sustainable and self-sustaining.
I’m well aware that savers feel pinched by the accommodative monetary policy and the low interest rates. But monetary policy isn’t the only variable that has a bearing on interest rate levels – real long-term interest rates over the economic cycle also depend to a large extent on trend growth.