And hence the commitment I reaffirm today to bring inflation back towards 2% by 2025, is consistent with the full transmission of the monetary tightening at work until summer 2023. b. Against this backdrop of significant transmission "in the pipe" and still to come in real economy, a deceleration in the size of the policy steps (from 50bp to 25 bp) was wise and cautious. We obviously keep our hands free, but we add the capacity of observing and monitoring the pass-through of our massive past hikes. Persistence is now more important than speed; the duration for which we will maintain rates is now more important than the precise terminal level we will reach. Or in other words, for interest rates as with ballistics, "longer" is becoming more significant than "higher". c. Hence, our next rate decisions should not focus such attention; we already have completed most of our rate-hiking journey, and we are clearly in restrictive territory. That said, as I said already last January, I expect today that we will be at the terminal rate not later than by summer, which starts in June and ends in September. Hence we have three possible Governing Councils either to hike or to pause; but don't deduce a guidance from this or a preference for a given terminal rate. We will remain data driven, looking meeting by meeting at the outlook for headline as well as for underlying inflation. Monetary policy is at work and rest assured, we'll do the job: we'll bring inflation back towards 2%.
We'll do it with the necessary patience – looking at the 2025 horizon for full transmission, with persistence – maintaining restrictive interest rates for long enough, and pragmatism – monitoring actual economic data. But once more, monetary policy cannot be the only game in town. Fiscal policies should adjust and consolidate, first and foremost scrapping energy subsidies as the European Commission rightly advocated yesterday ; wage negotiations and mark-up decisions by firms should incorporate the expected decrease in inflation; and still more, structural reforms are needed more than ever to increase the supply-side capacity and flexibility in Europe and in France.3 And  2/3  BIS - Central bankers' speeches  this is where Capital Markets Union would greatly help to finance investment and innovation, and hence reduce inflation. Let us acknowledge it: if we are lagging behind today in Europe, it's in this domain of supply transformations, and not in monetary policy. 1 Smets and Wouters (2005); see also ECB NAWM model presented in P. Lane's  lecture on 16/02/2023, "The euro area hiking cycle: an interim assessment". 2 Badinger and Schiman (2023), Measuring Monetary Policy in the Euro Area Using  SVARs with Residual Restrictions American Economic Journal: Macroeconomics 2023, 15(2): 279–305, or; see also ECB-BASE model. 3 François Villeroy de Galhau, Letter to the President of the Republic, « How France  and Europe will defeat inflation », April 2023. 3/3  BIS - Central bankers' speeches