Secondly, the European markets’ greater inflexibility makes it necessary to adopt a “preemptive” monetary policy strategy capable of stably anchoring inflation expectations. This is a direct consequence of the fact that, in the context of a high degree of inflexibility, the more inflation is allowed to grow, the more costly it then is, in terms of interest rate increases, to bring it back down to price stability. Indeed, the challenge that the central bank has had to face from the outset in the euro area has been precisely to boost monetary policy’s ability to 8 pre-empt inflation from gaining a foothold in the private sector expectations. The irony is that, the more monetary policy is able to act in a pre-emptive fashion and to anchor people’s inflation expectations, the more inflation stays under control and thus the less need there is to intervene aggressively on interest rates. If such a strategy is successful and the central bank is credible in its anti-inflation policy, statistics commonly used to assess monetary policy activism (such as the frequency and breadth of changes to the official interest rate) ironically show the opposite, namely that monetary policy is not very active or even that it is passive, whereas precisely the reverse is true. 5  For the euro area, see Dhyne, E. et al.
And third: I'd like to wish everyone a happy Valentine's Day. As Rihanna sang at the Super Bowl, I hope you all have someone to stand under your umbrella. Inflation Is Still Too High Economic developments over the past three years have been extraordinary. The pandemic contributed to dramatic swings in our economy - and economies around the world-that we are still grappling with today. At the onset, we experienced the deepest but also the shortest-recession in U.S. history, as well as an immediate spike in unemployment, the highest since the Great Depression. Then, along with Russia's war against Ukraine, the pandemic contributed to skyrocketing inflation, which reached 7 percent last June, as measured by the personal consumption expenditures (PCE) price index . That's a level we had not seen for four decades, and one that is well above the FOMC's longer-term goal of 2 percent. High inflation hurts everyone, but it's hardest on those who can least afford essentials like food, housing, and transportation. Persistently high inflation also undermines the ability of our economy to reach its full potential. The Federal Reserve has a dual  1/5  BIS - Central bankers' speeches  mandate, set by Congress, to promote price stability and maximum employment. And price stability is essential for the achievement of maximum employment on a sustained basis. Over the past year, the FOMC has taken strong actions to bring inflation down. Although we have seen some moderation in recent months, the inflation rate remains far too high at 5 percent.