In step with the normalisation of monetary policy, net purchases under the pandemic emergency purchase programme (PEPP) were discontinued on 31 March. The maturing principal payments from securities purchased under the PEPP will be reinvested until at least the end of 2024, and in the event of renewed market fragmentation related to the pandemic, PEPP reinvestments can be adjusted flexibly. Further, at our meeting of 14 April, the Governing Council judged that the incoming data reinforced our expectation that net asset purchases under the asset purchase programme (APP) should be concluded in the third quarter of 2022. We also indicated that the raising of key ECB interest rates will take place some time after the end of the net purchases and will be gradual. Lastly, the ECB Governing Council stated that we stand ready to adjust all of our instruments within our mandate, incorporating flexibility if warranted, to ensure that inflation stabilises at its 2% target over the medium term. The pandemic has shown that, under stressed conditions, flexibility in the design and conduct of asset purchases has helped to counter the impaired transmission of monetary policy and made the Governing Council’s efforts to achieve its goal more effective. Within the Governing Council’s mandate, under stressed conditions, flexibility will remain an element of monetary policy whenever threats to monetary policy transmission jeopardise the attainment of price stability. In step with the communication of this process of monetary policy normalisation, market expectations of policy rate hikes have been brought forward since December.
And if developments turn out as we expect, inflation will return to target with little rise in unemployment. We project some rise in unemployment, but from a very low level, and a slightly smaller rise than we anticipated in December. Wage growth is expected to slow from next year, but lower inflation will probably result in firm growth in purchasing power in the years ahead. Let me emphasise that the forecasts are precisely that – forecasts – and not a promise. If the krone proves weaker than projected, or pressures in the economy persist, a higher policy rate than currently projected may be needed to bring inflation down to target. If inflation falls faster or unemployment rises more than projected, the policy rate may be lower than projected. 3/3  BIS - Central bankers' speeches