The convergence of market expectations towards the ECB’s indications about the size and horizon of net asset purchases has proceeded in tandem with the gradual rise of inflation expectations towards our medium-term policy aim.
Likewise, there is a strong co-movement between markets’ views of the convergence of inflation towards the ECB’s aim on the one hand and, on the other, the length of the interval between the end of net asset purchases and the first rate rise fully priced into market rates. This suggests that our monetary policy reaction function is well understood.