Clearly, the Eurosystem must ensure that the current elevated inflation does not become entrenched and persist at an excessively high level over the medium term. The ECB Governing Council decided in March to reduce purchases under the APP asset purchase programme more quickly than previously intended – from € billion in April to € billion in June.
And while central banks can usually afford to “look through” temporary shocks, more persistent shocks that risk destabilising inflation expectations may require a shorter horizon. I will come back to this later. For the ECB, this means that the length of the “medium term” – which is an integral part of its definition of price stability – will vary over time.