For that matter, the criticisms arising from the Asian Crisis could be properly directed only at the “fixed but adjustable” segment of the spectrum, where reserves were spent in futile defence of a rate which markets no longer believed was viable.
In the current environment, perhaps the single most important transmission channel of oil-priceinduced risks into higher future inflation consists in longer-term inflation expectations becoming unanchored. And while it is true that current long-term inflation expectations are compatible with the Eurosystem’s definition of price stability this argument cannot be used to justify a monetary policy of “wait and see”.