It follows that this normalisation component is expected to be essentially permanent in nature. On the other hand, the hike of policy rates into restrictive territory during the first half of this year reflects a more temporary component of the tightening cycle.
While the ECB will set policy rates at sufficiently restrictive levels for sufficiently long to ensure a timely return of inflation to our medium-term two per cent target, the restrictive component of monetary policy will ultimately be unwound in order to stabilise inflation at our target rather than unleashing a subsequent phase of chronically below-target inflation.