BCB Director David says de-anchored inflation expectations forced higher rates for longer; adds monetary policy remained effective despite credit stimulus
- Idea is that at the end of the calibration process, will remain in contractionary monetary policy stance.
- BCB is keeping policy contractionary until it is convinced inflation is heading back towards target.
- BCB is troubled by inflation expectations trouble them the most, especially for 2028.
- If BCB finds out the output gap is not neutral, BCB will work with that.
- Don't have a target for the level of outstanding FX swaps.
- Central bank will not react to every price shock from conflict, but will not tolerate spillover into broader inflation over time.
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