Instead, it implies that the latest inflation data matter insofar as they contain information regarding medium-term inflationary pressures. By its very nature, the medium-term orientation requires projecting the future path of inflation. Surveys and financial market instruments provide us with a useful tool in this respect, as they give us evidence of how different agents (experts, households, firms, and financial market participants) see inflation evolving going forward. In addition, central banks rely on their staff’s forecasts for inflation and economic activity –which typically draw on a huge amount of economic and monetary analyses– as a key input in their decision-making process. Summing up, our task is not to respond to the latest inflation data point, a futile and – especially in the face of adverse supply shocks– counterproductive task, but to stabilise inflation over the medium run at the desired level, in our case 2%, while ensuring that longerrun inflation expectations remain anchored to the target. Returning inflation to 2 % over the medium run In the context of a steady increase in medium-term inflation expectations, as economies recovered from the worst phase of the pandemic crisis, at the end of 2021 we started at the ECB Governing Council a process of progressive normalisation of our monetary policy. The first step was to withdraw the extraordinary policy stimulus that we had launched at the onset of the pandemic. To this end, in March we stopped the net asset purchases under the PEPP.
In this scenario, energy and food commodity prices are assumed to increase substantially due to severe supply disruptions associated with an intensification of the war in Ukraine, combined with other negative shocks to the European economy.5 The result would be an inflation rate of 6.9% in 2023 and 2.7% in 2024. Let me emphasise, however, that despite all the recent developments regarding gas supply through the Nord stream pipeline, one cannot assume that we are already in the downside scenario. This is because the other shocks assumed in this downside scenario have not materialised yet. Indeed, several key commodity prices – including energy prices - are currently below the ECB baseline scenario (and more so in comparison to the downside scenario), which may reflect lower than expected demand. 4  For a discussion of second round effects in the euro area, see Battistini, N. , H. Grapow, E. Hahn and M. Soudan “Wage share dynamics and second-round effects on inflation after energy price surges in the 1970s and today”, ECB Economic Bulletin, Issue 5/2022 5 See Box 3 of the September ECB staff macroeconomic projections for the euro area,  2  Finally, an additional element of uncertainty is related to the synchronised tightening of monetary policy across countries and its impact on activity – including global spill-overs – and inflation.6 Framing our monetary policy response: the ECB’s monetary policy strategy As I said before, it is the ECB’s responsibility to preserve price stability in the euro area.