After discontinuing its net asset purchases (as of the announcement in December 2021 for the PEPP), the ECB Governing Council decided to raise its key rates at an unprecedented rate, by a total of 250 basis points in five months, between July and December 2022. Some felt that we started these rises too late: we can argue over whether it should have come a few weeks earlier – which would not have changed much – but I would just like to remind you of the initial doubts voiced by many economists over the inflationary shock, which was still seen as temporary a year ago, and notably concentrated in the energy supply. We needed to analyse and form an opinion: as soon as inflation clearly became more widespread and more persistent, we acted quickly and with force. At the end of 2022, monetary policy reached what we call “the neutral rate” zone, which is the theoretical equilibrium rate at which there is neither monetary expansion nor contraction of inflation. The Banque de France estimates that, in real terms, this neutral rate is currently just above 0% in the euro area – it is higher in the United States – and hence around 2% in nominal terms. It was a sprint race as we had to get to at least this neutral rate as fast as possible. Clearly we have gone beyond that today, and as a result have entered “restrictive” territory in the technical sense.
13  Unlike methods based on the exclusion of individual items, the PCCI is constructed by filtering out the transient component of inflation using econometric techniques in order to retain the persistent component(s) that is(are) common to all items. 14 The PCCI is calculated using the monthly changes in each item. 16  Page 17 of 19  The inflation expectations of euro area households rose at the start of 2022; they have since stabilised but have not fallen to any significant extent: in December, the median three-year ahead expectation was 3% according to the ECB’s CES 15 survey. The survey also shows that households’ responses on future price changes continue to be more widely dispersed. Regarding businesses’ inflation expectations, the Banque de France – after Banca d’Italia – is a pioneer in this field, having launched its own dedicated survey two years ago. As in the case of households, this survey shows a rise in the median three to five-year ahead expectation, which reached 3% by mid-2022 and has merely stabilised since then. 15  Consumer Expectations Survey. 17  Page 18 of 19  We have thus avoided a significant “unanchoring” of households’ and businesses’ medium-term expectations; but we still need to ensure they become lastingly “reanchored” towards the 2% target. Conclusion Today I have given no dates or figures: doing so would be meaningless and would equate to coming back to unconditional and excessively binding guidance.