By bringing aggregate supply and demand back into balance, we will accelerate the process by which inflation will fall back to our 2% target and thereby ensure that longer-term inflation expectations remain anchored.
Third, the experience of the 1970s shows that a policy that is falsely calibrated on the assumption that inflation will decline by itself could ultimately put the green transition more fundamentally at risk. In this case, monetary policy would need to raise interest rates even more forcefully to restore trust in the economy’s nominal anchor.