While not the focus of my remarks today, this feature of the UK labour market is an important backdrop to our monetary policy decisions. And if we do too little with interest rates now, we will only have to do more later on. The experience of the 1970s taught us that important lesson. But equally – second – we have to monitor carefully how the tightening we have already done is  Page 12  working its way through the economy to the prices faced by consumers. Our outreach events make clear that we need to calibrate monetary policy with great care to return inflation to target sustainably. That is the best contribution monetary policy can make to a fair society. Thank you for listening  In light of all this, let me conclude with some final thoughts on how we approach the months ahead. At the Monetary Policy Committee’s February meeting, we made a very deliberate change to the way we described our view of the outlook. We moved away from what had effectively been a presumption at our previous meetings that further increases in Bank Rate would be required. In the Committee’s forecast, headline consumer price inflation was projected to fall sharply over the rest of year, more so in the second half. We recognised, however, that further tightening would be required if there were to be evidence of more persistent inflationary pressures.
It is already clear however that it will amplify the headwinds to the strong recovery that the euro –area has been experiencing in 2021, and that it will intensify inflation pressures in a context where inflation has already increased significantly and will remain high over the coming months. The general uncertainty that marks the euro-area macroeconomic environment has implications for the conduct of monetary policy. In these conditions, it is important to balance carefully the risks of waiting too long to act as opposed to those of normalizing too soon. In any case, the  commitment of the ECB is clear: the Governing Council will do what is necessary to bring inflation firmly and durably to around two per cent over the medium term. The forward guidance, relying on state contingent criteria and the “sequencing” are instrumental to this goal. Policy normalization will follow a clear order: the ECB will end its asset purchases first, likely in Q3 2022, then raise the key interest rates, eventually reducing its balance sheet in a third step. All along this gradual process of normalization, the Governing Council of the ECB made it clear that it will maintainoptionality; gradualism and flexibility in the conduct of monetary policy. In that context, financial markets are currently considering that the rise in interest rates might start in the near future, with a first 25 bps hike almost fully factored in (90 %) as of next July, followed by two others by the end of this year.